Dec. 27, 2021

Some Old Familiar Names.

Well, Today we are just 5 trading days away from that final trading day of the year. On that day, all of the positions that you hold in your portfolio will be recorded for posterity.

If you're a public fund, such as a mutual fund, hedge fund, pension, or other funds. These are the positions upon which you will be judged.

What makes this final quarter of 2021 so very interesting, is the dramatic changes that we have seen in the various groups of stocks.

For years now, we've seen one group, technology dominate the top spot. Names we're all familiar with: Apple Computer, Amazon, Alphabet Google, Microsoft, and Facebook.

This is the group with the best performance year after year. For any portfolio manager, this is the group you've wanted to hold in your fund. It shows that you've understood the forces at work in the economy, which have been most favorable for big tech in general, and these 5 companies in particular.

But not this quarter. This quarter everything changed. And it clearly reflects the major changes in our economy.

Ask the average person on the street what the dominant economic trend is, and they'll immediately tell you: it's inflation. They see it at the gas pump, at the grocery store, in fact in everything they do prices are higher. Sky-rocketing in fact, at levels most of us haven't seen in a lifetime.

And the markets have been quick to recognize this new inflation trend. That's the strength of our free and open financial system. Literally, millions of investors, making independent decisions can quickly pivot to new trends and directions in the overall economy.

As they did this quarter when they reward two groups whose businesses are centered on real tangible assets. As opposed to the virtual assets of technology.

With just a few days left in the quarter, the number one performing stock group has been the Basic Materials Sectors. Such old-line companies, with familiar names such as Dow Chemical, DuPont, Sherwin Williams, and Eco-labs.

Companies who make things. Tangible things rise in price with the overall acceleration of inflation.

Likewise, the second-best performing group also deals in very tangible assets: Real Estate. You can't get much more tangible than real estate. And, as the millions of homeowners across the country can attest, it's been a very good time for home prices.

The real estate sector is dominated by Real Estate Investment Trusts. REITs with such names as American Tower, Prologis, and Crown Castle.

None of these companies, in either Basic Materials or in Real Estate are new names. Companies with some breakthrough technology, or innovation that promises to set the world on fire.

These are established, tried and true companies, who's one new dynamic is the appreciation of their underlying products and properties. It's inflation, pure and simple, which has brought them to their number one status.

And it is this underlying inflation, which is now causing a major realignment in the nation's capital structure. Wall Street is at the very beginning of a process that will take funds from an allocation that was Tech heavy, to one which will now rely on this new macro trend. Of monetary decline.

Technology relied on a strong dollar to maintain its competitive status worldwide. These hard asset companies, basic materials, and real estate automatically benefit from their hard asset appreciation due to the very weakness of the dollar.

It's the kind of major shift that we see only rarely. But clearly, the markets have already recognized this inflation-based change.