The correlation between inflation and tech stocks.

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Today's Letter

• Inflation vs Tech Stocks - Were we bamboozled?

• Gold vs Inflation

• Top Short-Squeeze Stocks

Inflation vs Tech Stocks - Were we bamboozled?

Is the market really based on the performance of companies? Or are we simply throwing darts randomly at a board and seeing where Mr. Market lands us a bulls-eye?? It could be a little bit of both, but one thing is for certain is that company valuations have the tendency to expand and contract with a correlation to inflation, and inversely to interest rates. I’m sure bonds would also like to have a word with me, but their tendencies are also fairly predictable. Bonds go up, stocks go down, and vice-versa.

The market always finds the path of least resistance to the easiest returns, not necessarily the greatest and most risky. This is why when bonds go up even a handful of bps they can cause a cascade of volatility in the markets. In 2022 enters the Fed's policies, that are telling active market participants to find a return on investment elsewhere as interest rates rise.

So what is the path of least resistance right now? Let’s look at the QQQ relative to inflation over the last two decades. Do you spot the trend?

Inflation skyrocketing = asset prices skyrocketing.

Inflation going down = asset prices going down.

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