The DBC ETF gained 7.3% on the week and this is the largest weekly gain since March 20, 2009.
Below is a weekly chart of DBC ETF since inception along with weekly returns plot.
A 7.3% weekly gain was the largest since a 9.4% weekly gain on March 20, 2009.
As it may be seen from the above chart, large weekly gains haven’t been associated with rise in inflation in the past but only with “expectations” of rise in inflation, as in 2009, 2011 and 2012, due to fears from the effects of quantitative easing.
The current situation is different due to a supply shock and an explosion in central bank balance sheet. However, the link between high commodity prices and inflation is too weak. I’m more concerned about rising wages than higher commodity prices.
The economy is too complex for any model or expert to forecast what will happen next. Traditional major drivers of deflation are still in place, such as the demographics problem and high technology. At the same time, there is proliferation of new money in the form of crypto, wages pressures and supply issues. How all these will interplay is anyone’s’ guess and in my humble opinion those who pretend to know only do exactly that: pretend.
Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. Read the full disclaimer here.
Charting and backtesting program: Amibroker. Data provider: Norgate Data
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