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The Lead-Lag Report: Forced Reflation


SuperBen and the League of Extraordinary Bankers are forcing reflation upon us, and for risk assets, that's bullish.


Technology (XLK) – Rolling Over

Comments: Despite continued hype and excitement over Apple (AAPL), the technology sector still appears to be in the early stages of weakness as it rolls over relative to the S&P 500 (^GSPC). More time is needed to confirm, but other sectors are comparatively more attractive.

Bonds (IEF) – Sharp Underperformance

Comments: Two weeks ago I noted that "some strength has crept back in to bonds relative to stocks as the world waits for a new bond buying program by the Fed. However, other interest rate-sensitive sectors are not confirming bond strength. Weakness in fixed income instruments relative to stocks may continue shortly. Stocks continue to show resiliency, making continued underperformance in Treasuries likely in the near-term." Given the reflationary policies of both the ECB and the Fed, stocks continue to look more favorable.


The most noticeable moves over the past week happened in the bond market, as Treasury Inflation Protected Securities utterly spiked following the Fed's QE3 announcement. The potential for forced reflation continues as various intermarket relationships continue to favor risk assets.

Editor's note: This update is published every week exclusively for Minyanville, and is compiled by Michael A. Gayed, CFA, Chief Investment Strategist of Pension Partners, LLC.

Twitter: @pensionpartners
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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