Precious metals, particularly gold, are starting to rise as central banks appear to be in no rush to raise interest rates. Despite plans to scale back asset purchases (quantitative easing), market participants view monetary policy as broadly accommodative, which has supported seasonal strength in equities. Therefore, our indicators remain in risk-on mode with portfolios positioned for upside in materials (which benefit from strength in industrial and precious metals), small-cap, consumer, and healthcare stocks.
Our fixed income portfolios rotated out of gold and into the U.S. dollar over the past few months. This was a tactical hedge given bearish seasonal factors for gold, particularly in September. Currently, we are on watch for a confirmed breakout in gold, which tends to produce positive returns in the fourth quarter and into January.
Gold on watch for breakout
Source: Cannon Advisors, TradingView
Gold seasonal strength in December-January
Source: Cannon Advisors, StockCharts.com data