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The Lead-Lag Report: Forced Reflation

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

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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.

Conclusion

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.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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