Market Musings 02/08/20: Dollar Doldrums, Soaring Silver

US Dollar in the Doldrums

Trend 1 in July: the persistent weakness of the US dollar, against:

• FX: Euro, Yen, even Sterling!
• Precious metals: Gold, Silver
• Cryptocurrencies: Bitcoin, Ethereum

Just check out this monthly chart of £UUP, the US dolalr ETF that tracks a basket of US dollar against euro, yen, sterling etc.

US Dollar ETF takes a dive in July

The uptrend in £PHSP physical silver over July hs been breathtaking, with silver mounting a catch-up to gold:

Silver on a tear, perhaps vulnerable to a pullback after such a meteoric ris

But note that, while gold has achieved a new all-time high after touching the $2000/oz level briefly in July, silver at $24.4/oz remains far far away from its 2011 high of clse to $50/oz.

Even with the risk of a near-term pullback, I remain enthusiastic about the long-term prospects for this less-precious metal.

Similarly, if one follows this logic, one should also be looking at silver miners. In the UK, Fresnillo (LON:FRES) and Hochschild Mining (LON:HOC) are two such silver (and gold) mining stocks.

However, in the US there are also silver miner ETFs; I am looking at £SILJ - the junior silver miners ETF as an attractive way to gain leveraged exposure to any rise in the silver price over the long-term.

SILJ Junior Silver Miner ETF has long-term potential

In the cryptocurrency space, there is a lot of excitement over "digital gold" in the form of bitcoin, while the second largest cryptocurrency, Ethereum, is rallying even harder as the US dollar falters.

Ethereum on a tear, but very volatile!

For those that like to dream, note that Ethereum is still only less than one-third of its peak 2018 level...

Bonds may be boring, but a bull market still...

While we may mre or less forget yield these days in sovereign bonds, we should not ignore the ongoing bull market in bonds, most notably in inflation-linked bonds and also in corporate bonds, as central banks including the US Federal Reserve continue to directly buy these asset classes in huge size, underpinning prices and distorting the overall financial markets.

US inflation-linked bonds had a huge July

US corporate bonds also did very well yet again in July, as investors continue to chase down yields and relatively secure income wherever they can still find it...

US corporate bonds rally yet again

Stocks: Dog Days of Summer, except for Tech

We should remember that summertime is typically a seasonally poor period for stock indices, especially in Europe, with October the time to see potentially a run-up towards year-end.

We have certainly had a bumper earnings results season so far, but the generally positive tone of the quarterly results have done little to boost the overall stock indices, except in the case of the tech-heavy Nasdaq 100.

Indeed, we can see that the entire S&P 500 index is being carried by the momentum in the Top 5 sstocks by size, notably the FANGs.

Nasdaq 100 continues higher post-results

In contrast, the UK FTSE 100 looks positively sickly, dragged down by the poor performance yet again of big Oil and the Banks.

FTSE 100 loses all momentum in July

Where to look in world increasingly bereft of regular income

I think that the hunt for regular income will only intensify in the coming months and years, post the disappearance of yield in European and now US sovereign bonds, with European investment-grade corporate bonds also offering vanishing yields and with cash deposit rates set to remain at or near zero for an extended period.

My focus for regular income remains with real assets, such as real estate, infrastructure and the like, where enticing yields can still be found. In the UK investment trust sector, one can also find real asset-based trusts trading at a discount to net asset value, which adds to their attractions.

Some real asset-based investment trusts with solid dividend yields that perhaps bear further investigation for any income -seeking investor:

• Residential Secure Income (LON:RESI)
• Warehouse Reit (LON:WHR)
• Supermarket Income Reit (LON:SUPR)

Good luck for the week ahead,

Edmund