Santiago capital founder Brent Johnson and Erik discuss the 2020 outlook for the US dollar, equites and Gold.
• Johnson argues that this year, short dollar is a consensus trade and data point to the dollar heading higher in next 2-3 years.
• The dollar should have weakened on 2019 events such as the impeachment of the US president, the trade war, fed pivot to 3 rate cuts. Yet, the dollar stayed flat showing its resilience.
• Johnson has been bullish US equities since . He maintains an unconventional reason for the rise of US equities. He believes the global financial system is weak, and global capital is flowing to the US amidst investor concerns about the system.
• Despite the S&P rising more than he expected in 2019, he still is targeting 4,000 in the S&P (20% higher than current levels. But the next couple of months could be volatile so he recommends hedging
• Johnson maintains his strong conviction of gold reaching $5,000. In the short term, however he states that gold is overbought and will fall back to $1,350 level.
Why does this matter? Johnson remains bullish on US equities and doesn’t not think we are at an inflection point yet. His argument that global investors are flocking to US equities is validated by flow data in our opinion, so we’d question his rationale. Nevertheless, the US tech sector and the strength of the US economy could be enough for additional US gains. He is bearish on gold short term but if you don’t own gold now is as good a time as any to own it.
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