Podcast - Understanding Market Trends with Jeff deGraaf

Welcome to Beyond the Benchmark, the EFG podcast with Moz Afzal.

Moz Afzal:

Hi everyone. So today we have our favourite technical analyst, Jeff deGraaf from RenMac. Jeff, welcome.

Jeff deGraaf:

Thank you.

Moz Afzal:

So many of you listened to this podcast. I think this is maybe the third, maybe fourth time. I think Jeff, you've come on and probably one of the most frequently requested speakers for us, and also we know he's getting ever popular in the marketplace through his various difficult channels. So Jeff, what are you seeing right now?

Jeff deGraaf:

Well, thank you for having us, Moz. I appreciate it and it has become a little bit of a December tradition, so I always look forward to it. So look, I think from an equity market perspective last year, let's rewind the clock a little bit. Last year we had a few things going for us. The equity markets did. One was our market cycle clock, which I'll hit on, which was showing this continued trajectory of likely lower inflation and kind of below par growth. And believe it or not, that tends to be bullish for equities because it tends to suggest that the Fed and policymakers are likely to start to lean into that, and that tends to be more beneficial to equities than just the contemporaneous data. So that was good news. We also had this extreme in sentiment where people were relatively bearish, and just couldn't really create the bullish narrative in their minds.

And interestingly enough, almost exactly a year ago we had this surge in internal momentum measures that we look at. In fact, it was as high as we'd seen since 1957. Some of 'em, which were really just kind of off the charts. We liken that to escape velocity. When we get that, it says that good things are likely to happen, and that was happening within the context of still an uptrend for equity. So that combination said, look, the background is there for a rally. The market is confirming that rally and the sentiment is suggesting that there's more to go in this rally. And so obviously that set the stage for what we thought was historically, and this is just using the historical averages of that combination. It was about a 23% return, which said to us, 2024 should get us somewhere around 5,800. That sounded like heresy at the time.

Obviously it proved to be a little conservative, at least to this point. And where we are today, what's interesting is we don't have that velocity anymore, that something that has faded, it's not bad, but it just doesn't have that same resounding signature that it did. The market cycle clock is actually still in a good spot. And if it suggests that two year yields or the short end of the curve should contract further from here into 2025, I would say the one thing that stands in our way is sentiment. And sentiment, while I don't think it's a big problem right here, I think it will be something that gives us a correction or gives us some type of consolidation, probably in the first half, maybe even the first quarter of 2025. I think that proves to be viable. I think the market is going to look at an above average return.

I'd say it's probably somewhere between 12 and 15% for 2025. So that gets us right into just about that 7,000 mark if we take the upper end of that. But all things considered, I think without having a momentum market, what it says to us is you want to be a buyer of weakness. You don't need to chase things. You can be a little bit more thoughtful in terms of your approach. That was not the case last year. When we get that escape velocity, really the risk is not having exposure, not trying to pick the right price. That's not where we are today. So I think from a seasonal standpoint, we still have good seasonal trends that actually last throughout the end of January. So in the near term, I think that that's going to be more important than the sentiment. But after that, if the status quo remains, I think we look for some type of consolidation or pullback in the early part of 2025. But again, we'd use that opportunistically.

Moz Afzal:

So yeah, first congrats. You were, I think, probably pretty much the most bullish. Maybe one other person was just as bullish as you at the beginning of this year, end of last year. I think I remember reading your 5,800 and thinking, wow, gosh, Jeff's really going for it. But I think you must have got a lot of pushback on that 5,800 call.

Jeff deGraaf:

Yeah, well, we have a Twitter account for the firm at Red Mac LC. I'll plug it right there. But honestly for I would say 80% of the reason that we have that is to kind of put these trial balloons out there and see how much flack we take from it. So a lot of times we'll put these inflammatory things out there just to see how right we think we are just to get the resistance, if you will, from some of those ideas. But absolutely, I mean people were lambasting us for that call.

Moz Afzal:

Yeah, no, and I remember we had a discussion when you made that call in the team here and we're like, okay, well Jeff's kind of up there and then just looking at every single Wall Street analyst, they were maybe 5, 600 even 700 points away from you for the full year forecast for 2024. And so we were putting bets on in the team, so we'll think Jeff is probably going to be right. Because we’ve all been around for a while, so we kind of know consensus was very, very negative. And I think your comment on the internal momentum that was generated in that December period gave some decent signals that this was probably going to be a reasonable year, and even better because of that sentiment. So just want to touch upon the market cycle clock. Maybe you can just talk a little bit about how do you arrive at your market cycle clock. And in terms of your clock itself, where we are today, what sort of sectors tend to lead the market forward?

Jeff deGraaf:

So one of the things that we do is juxtapose inflation versus growth. And there's a lot of different inputs to those. We don't use CPI, we find that that tends to be a little bit ivory tower. And I think one of the misconceptions in this business is people have a tendency to believe that if they can predict the economy correctly, they'll get the market right. And I would say they're not conjoined twins. They're at best second cousins. And really what tends to happen is the market tends to lead the economy. So there's a lot of intellectual capital that is spent trying to predict the economy instead of just kind of listening to the market. And so one of the things that we do with our inflation and growth inputs for that matter is instead of regressing or looking at the impact that these data points have on the real economy, we actually look at what the inputs have on the S&P and on the market.

And that seems like a very subtle and almost inconsequential difference, but it actually proves to be really, really important. And so in many instances, the worse the data, the better it is for equities. And again, gets back to that sort of forces both the Fed and policymakers to react and start to support things or push against them for that matter if things are too hot. But one of the big things, and I think this is really important as the market for whatever reason seems to be missing this, which is a huge portion of the inflation input, and this is true for both PCE, CPI and the way that we look at the world is derived from the price of oil and energy prices. And so if you look at where we are today, which is pretty astounding given the turmoil in the Middle East and Ukraine and the like, we're bobbing up against this long-term support level right around $65 a barrel.

We actually think if you play the trends that that's probably going to break lower if incoming President Trump sort of has his mandates and the drill baby drill and he actually pushes the price down, which by the way, I mean if you're talking about solving the inflation problem for real Americans and frankly the globe, that's a good way to do it. I know that there are environmental consequences to that maybe, but clearly that is something that can have an impact. And so I think thinking about things through the lens of energy and just the performance of energy stocks is likely to push that inflation number continued lower. So that to us, if that comes to fruition, I think that's an upside that people aren't really putting into their black box here to drive an output. And I think that's probably a mistake. So when we look at it, and in fact to that point you asked about sectors at this zone of the market cycle clock.

So just for clarification, we're in the lowest zone, we divide it into thirds, we're in the lowest zone from an inflation standpoint. And it's not so much about the level of inflation as it is the direction of inflation. So the markets don't tend to care about the level or the value. They tend to care about if things are better or they're worse, not if they're good or bad. So as long as inflation is getting better, that tends to be a good sign. And the other part of that equation for us is growth. And so growth is also in the bottom third. And again, that tends to be good news because it's not inflationary, it tends to suggest there's excess capacity and you tend to be, as long as there's enough activity in the marketplace, you tend to be on a pretty good trajectory there. So I like that, that we're in the bottom left hand zone in our market cycle clock.

And interesting enough, maybe coincidentally when we take the data back to the early 1960s from a sector perspective, it is definitively the worst zone to be in if you're an energy investor. So in other words, energy does tend to contract, it tends to struggle in this zone because generally those prices are stable to falling and the relative performance can be really attributed or shifted towards things like consumer discretionary. So for every dollar I'm putting in my gas a lean tank, I've got one to spend on apparel or restaurants or whatever the case may be. So that's a huge beneficiary of that and we think discretionary is setting up pretty nicely for 2025. The other is tech. So I don't think that's any great surprise there. And then finally, industrials, which have been on a good run here and they do in some of our work suggest that they're in the latter innings, but the relative performance is still there.

And we're starting to see a little bit of that shift towards small caps away from large caps as well, which tends to be a good sign. So energy at the bottom of that list, which I think is good news now for energy investors, the good news from our seat is that the valuations in energy are very, very attractive. The problem is there's just no traction that's being gained in the relative performance metrics. So we always look at that as kind of our go-to, to whether or not we're going to be involved. So I don't think that there's a disaster happening in energy, but I do think that there's going to be continued pressure and a move more towards those cyclical names.

Moz Afzal:

And financials. Are you looking at those, because obviously they've been one of the big winners in 2024. Do you think they continue in 2025?

Jeff deGraaf:

Yeah, it is a great question. And it's interesting because when we go through and look and we determine what's cyclical and what's defensive, we do it based on the relative performance to forward GDP historically. And we've got about 70 years worth of data that we measure that against. And as I mentioned, industrials, discretionary tech tend to be cyclical. They had the highest relative performance to forward GDP, healthcare, staples and utilities have the lowest, so they're the most defensive. So you've got energy, you've got materials, you've got financials serve in between. And what's interesting is sometimes financials, they tend to change their stripes. Sometimes they're cyclical, sometimes they're more defensive. Clearly right now they're acting more cyclical, which I think is bullish. I also think, and this is really important, I think you have to look at it within the context of some of these concerns that are out there around unsustainable deficits or this debt spiral and interest rates going to 6 or 7%.

Maybe that happens, but that's very unlikely to be the case if financials are performing this well, right? I mean there's this sensitivity that financials have not only to the credit cycle, but also to the business cycle and the like and what they're saying. And maybe it's partly based on regulation in this deregulation environment that people are expecting. But I also think that there's something to it which says the economy is probably in good shape and you're seeing that through triple B spreads to treasuries, and we're probably not going to have this interest rate volatility that's going to be so impactful as to really derail this move in financials. And I think what's interesting, and I'm sure you've seen it, which is, it is regional banks, right? The regional banks were supposedly the epicentre of this real estate commercial real estate problem. They've been acting really, they've been acting great since Silicon Valley Bank almost two years ago now. It's in the money centre banks, it's in the insurance names, it's in the consumer finance names, it's in the investment banks. So it's not just a pocket or a sleeve of financials that are acting well. It's really across the board. And I think that's pretty refreshing for the bulls out there to look at that as a leadership group and say the probabilities of a bear market when financials or leadership tend to go down pretty dramatically. And I think that's good news.

Moz Afzal:

So I guess the closest we've seen in terms of market behaviour at least has been sort of, I don’t know, 95, 96 period going back in time. There's a lot of echoes of financial performance in that period because they were one of the strongest sectors in 05 06.

Jeff deGraaf:

Yeah, I think you can draw the parallel to 94, 95, right? The Fed went in and they did their preemptive strike on inflation. They put things in or got things in order, if you will. And then the market kind of adjusted to those new levels and took off. We will see, my favourite saying in this business is, it's an old Greek saying, you never stand in the same river twice, right? That either the river's changed or you've changed. So I'm always a little leery about drawing exact parallels because things are always changing. But I do think that there is something to that. And look, I mean as long as those triple B spreads, and I think this is something that people miss, particularly the bears, as long as those triple B spreads remain relatively placid and they're trading at roughly a hundred basis points over treasury right here, I think it's very hard to wear a bearish hat in a dominant way.

I think you can be certainly open to suggestion, but I don't think that's the base case here. So credit has been very well behaved and frankly I've been amazed. I mean if you asked me two or three years ago the Fed was going to do this to rates, what's going to happen to credit spreads? I'd have been the first one to raise my hand and say they're probably 500 basis points wider than treasuries, and that just has not been the case. So really there's been this amazing resilience that's been able to take place with the Fed raising rates and now seeming to be on the back end of that cycle where they're cutting rates. And the good news is, I don't think you need another 100 or 150 basis points out of the Fed for the bull to continue. I think they just need to maintain this altitude and you might have to adjust here and there, but for the most part, I think they're in a pretty good spot.

And look, I would've been the first one two years ago, maybe three years ago, to give them a D in terms of they stayed too loose for too long. We were seeing it in our work. It was pretty apparent they really had to get things under control. I thought by doing that they would've ended up sparking a recession or something that was more dramatic than what we've seen. They were essentially, I mean if you think about it back to the SPACs and some of these other instruments, they were essentially able to somehow deflate the excesses in the financial markets without killing the real economy. That's a very, very hard thing to do. And I think particularly over the last, call it 12 to 18 months, they deserve an A or I know everybody wants to kind of rip on the fed, so let's give 'em an A minus to be a little bit less charitable.

Moz Afzal:

Yeah, no, I think you're absolutely right. I completely concur with every point of view. I think they've actually managed it pretty well. Considering where they were, you could debate and argue. They were late and so forth. But I think once they acted, they didn't stop until it came down and they've done a pretty good job and it's kind of proactivity and even cutting the, I know your colleague Neil Dutta was really egging them on to do the 50 back in August, and they delivered. But I think that kind of pragmatic approach probably means why credit spreads didn't blow out and haven't got worse. And when there was a tinge of that, it suddenly shut the door very quickly.

Jeff deGraaf:

Yeah, no doubt about it. And look at labour markets continue. If you ask Neil, labour markets continue to soften, not to the point of being in panic mode, but certainly enough to probably help alleviate those inflationary pressures and again, give you some runway to another two or three cuts in fed funds without being inflationary or being problematic for that delicate balance between growth and inflation. So I think they're generally in a pretty good spot.

Moz Afzal:

So finishing up on the US sectors, what are your thoughts around healthcare? What are your thoughts around say staples? Obviously they're the defensive sectors. Obviously utilities probably look a lot better given the interest rate and credit spread environment. What I'm quite intrigued of your thoughts around healthcare and staples and what's going on, especially in the context of RFK coming in.

Jeff deGraaf:

Right. Well, you certainly have seen some weakness in healthcare names around this potential nominee getting the nod. We'll see, that's always a wild card. I would say in my 35 year career, that I've found that fading political concerns is usually a more profitable approach than the alarmist view. So I think there's a lot of inertia in Washington. I think it's ripe for change, but I think those changes will probably be just more incremental than people may be expect. But we'll see. I mean, it'll be interesting. I would say in full disclosure, we thought that healthcare for 2024 was going to be one of the stronger contrarian calls. It was that real estate in China for us. And I'd say we got two and a half out of three, right? Or two out of three, right? Maybe. So the performance of healthcare, and I can tell you this from some of our work, we have what we call our serve model, standardised excess return model, which just measures essentially the standardised alpha score over time.

How much incremental risk adjusted return are you getting through sectors or industry groups? And there's a lot of fancy math to that, but basically says, are you really underperforming? Are you taking on more risk and worse returns than what you'd otherwise expect? And healthcare has been so bad that usually when we're down in this zone, it's a contrarian call. You can say, look, things are so bad unless this group is going out of business, which I don't think all of healthcare is going to go out of business. There's probably some opportunity here. And that was the case last year, and it's still the case this year. So we know that when it's a contrarian call, it can take up to 12 months. This one has gone longer. So it's been a little frustrating, but I do think from that standpoint, it's in a pretty interesting position.

I ask rhetorically whether or not this concern around RFK and maybe the regulation or the regulatory regime is almost that sentiment blow that you get at the final kind of throws of a low. So we'll see. I don't have a strong opinion on that. The way that we play that is when we get these extremes in returns, negative returns, it is then what we'll do is we'll incrementally be buyers of the industry groups and sub-industry groups that are breaking out and starting to show the relative performance because the early breakouts there tend to be the leaders for the next cycle, and that cycle can be five years long. It can be really, really have a long duration to it. So we haven't seen a lot of that. There's been certainly some intriguing and bullish charts in biotech. There's a few handful of names in some of the equipment names, other than the ozempic plays and the weight loss plays, there's not a lot going on in pharma. So that's been a little frustrating.

Life science tools is just a smattering of good and bad charts, so it hasn't been a consistent theme. Obviously we like to see themes and find our way into industries or sub-industries that we can really attach ourselves to, but right now it's just a smattering of individual names. And it's not to say that they're not worth playing, it's just thematically it's much more difficult to find those areas to really attach ourselves to. But they are certainly on the watch list for 2025 as they were in 24, and hopefully they come to fruition in this coming year.

Moz Afzal:

So moving right across the world. I know you have some very interesting views on China and certainly this time last year China was certainly considered by many as completely uninvestible and I happened to be in Hong Kong early this year in January, and with my chief economist, Stefan Gerlach, and it was probably the most depressing visit I've had to Hong Kong pretty much, well certainly in my life, but probably the most depressing visit I've had anywhere from an investment standpoint over the last 30 years of my career. And the first thing we did, we were underweight in Asia, but the first thing we did is we went to neutral because I was like, this is so bad, it just can't get worse. But what are your thoughts around China specifically in terms of the profile? I think you have some very interesting views and very contrarian views at this moment.

Jeff deGraaf:

Well, it is interesting in January, so that coincided with your trip, what we were seeing in the charts, and we have what we call a capitulation signal. Now that also as was mentioned with healthcare, that sort of excessive negative alpha was present in China and Hong Kong as well. So globally we'll do that for markets and our antenna kind of stick up when we see those extremes at the lows. What we also had in addition to that was this kind of pinpointed triangulated, capitulation signal, which just said that people were just giving up and it was kind of becoming a falling knife, if you will. And what we know from the capitulation signal historically when we look at it and look at the history of that is usually it's a very good tactical signal. It's more mixed for a long-term signal. So I mean that's meaningful, right? Even if you are a long-term player, you can usually play tactical things like that. And so we made a capitulation call at the end of January. I think it rallied about 30% over about a three month period and then it rolled back over.

Sometimes the trend will turn after those, sometimes it does what China did and it goes back down and there's just no kind of rhyme or reason for us around that. So we always have to be careful. What was interesting though is the way that it contracted after the rally was not significant. It was just kind of listless like you're slowly taking air out of the balloon. And so the momentum that developed off that low was enough that helped to change the trends. So the trends were actually improving in the summer here, the early summer of 2024. And then we had this unbelievable momentum that developed around this talk of stimulus and the Chinese version of Mario Draghi’s whatever it takes. And obviously the markets were up really, really big. Talk about escape velocity. We saw all those things and it has since come back and consolidated, but it hasn't derailed the momentum and it hasn't derailed the trends, which I think are important.

We're still bullish there. I think there's a big, big bottom that is taking place. I think what's interesting, there's two things. One is if you look at, and this really isn't our bailiwick, but we're always kind of quasi looking at this stuff. If you look at the growth rates versus the valuation, the peg ratios as an example, some of these really big marquee names are trading well below their growth rates. So single digit PEs with double digit growth rates, which is pretty impressive. Massive amounts of cash on the balance sheet. So if you look at that margin of safety, you're sitting at a market cap with 3% cash on the balance sheet, which is just unheard of here in the States. So there is a value element to that as well. Some of the pushback that we get, which I think is interesting, and I think it's totally valid.

People ask or suggest that they don't trust Xi Jinping and his policies, and I completely agree with that and can understand that, my retort to that would be, do you trust him to act in his own self-interest? And I think that's a bigger one that people are missing. In other words, he kind of needs to do something to make sure that he stays in power. So you might not trust him, but do you trust his own self-interests? And that's where I come down and say, I think he's going to do what he needs to do to stay in power. I mean, that's what these people do. Obviously we've seen it here in the states with President Biden and President Trump for that matter in terms of playing maybe dislodging the norms to make sure that things are in their own personal interests. I don't know why Xi Jinping would be any different than that.

So I do think that they'll act in their own self-interest to make sure that they stay in power. And then the other part of this, which I think is interesting, and I liken it's not perfect by any means, but I do liken it a little bit to the US in 2008. In 2008, if you remember, after Lehman Brothers collapsed and I was an alum of Lehman, within about six weeks they invented this TARP programme. They invented some of these backstops for the banking system and the market calmed down and it rallied just a little bit. Tim Geitner was proposed as treasury secretary. So there were some things that were happening that the market kind of liked, but it rallied into the end of the year. And then pretty quickly in the first quarter, it just disintegrated, right? It went from about 750 or 800 on the S&P down to about 665 or so.

So obviously that was a problem, but I thought was interesting. It was being led by financials. Financials were actually taking the market down in the first quarter of 2009, even though a lot of names were still well above their lows from the depths of 2008. So clearly there was rot in the financial system and that forced the government to step up and do more and create quantitative easing in some of these other programmes. And they finally really stepped into it in the early part of March. And then the market never looked back, and I think they're incrementally in the same spot. I think they had their 2008 moment. I think they're very close to probably enacting other things to get some more traction as it goes, but they're doing it more in an incrementalist fashion than just throwing everything at it at once and creating an unsustainable bubble that will then deteriorate.

I think the most interesting and probably bullish thing I'm seeing out of China is the relative performance of financials is actually one of the top sectors you'd look at tech as being the top sector financials have actually been outperforming for about a year now. So if we're talking about these black holes in the balance sheets that nobody knows what's going on real estate or whatever the case may be, the financials are not acting like that. They're acting like they actually have some ability to figure out what their proper value is and that there is some cauterization to this bleeding that's taken place. And I think that's a very distinct difference in what we saw here in the states in 2008, 2009, where we were being led down by financials in this case, they're actually, the stabilisation is happening within financials, which I think is important as we kind of think about the long-term trajectory of this. Is this just throwing good money after bad? Probably not if the financials are actually relatively outperforming.

Moz Afzal:

So fairly constructive on the outlook, but I guess just waiting for the next big momentum piece to come again. And it does, even if I look at the US sort of 08 of exactly how you put it, 08 was great and we didn't bottom until March of 09. It was like a two or three months before we hit the absolute bottom and then never look back.

Jeff deGraaf:

Right, right. Never look back.

Moz Afzal:

Yeah, it’s been actually quite extraordinary. So we'll certainly keep a very close eye on that and keep a very close eye on those underlying trends. Certainly, I was looking at some of the flow data out of China, still big outflows coming out of Chinese equities. So it is all very consistent with the same narrative that we saw in the 08, 09 low points in the US, and I guess I think you probably hit the nail on the head that you needed another round of stimulus or another round of creating a flaw to really get it going again. So I guess we have to wait for that to be the next catalyst.

Jeff deGraaf:

Yeah, it's not the magic wand moment. I think it's the sequencing of whatever the magic potion of the phrase is, right? And they just have to keep sprinkling the dust on it and sooner or later it will. Look, I have a lot of faith in the human spirit and human ingenuity, whether that's within a democratic capitalistic society or a regime laden dictatorship. I mean, I still are communist. I still think the human spirit has the ability to innovate and always strive for a better lot in life than where they are at any given point in time. So we will see if that optimism prevails.

Moz Afzal:

Indeed, we'll certainly watch that throughout the course of the next 6 to 12 months. So kind of drawing to the end, I think a couple of really interesting things I wanted to pick your brains on. First of all, and there's a big debate amongst us at the moment, is the role of the dollar going forward and what we've seen over the last 12 to 18 months where we've seen some kind of very unusual activity. For example, if I take the period, say 2008 to 2020, whenever there was deflationary concerns or market risk concerns, you'd always see the dollar rally. And then since 2020 onwards, what you've seen when there's been a risk on moment or risk off moment, sorry, of volatility, now you're seeing the dollar weaken. And so in terms of from my perspective, this is a very different playbook that we are seeing drawing out over the last call it sort of two or three years.

And actually over the summer, it was super interesting and when we saw some of the volatility, how the dollar was behaving as it did in 2020, have you looked at any of those sort of trends? Is this something that's kind of peaking your interest? The other one I'll just throw in there just for interest sake is gold and the dollar, right? Since when were gold and dollar fully correlated, you supposed to be inversely correlated. So what are your thoughts? Is this some sort of regime train change that is starting to filter into asset classes, maybe over ownership? And I think about now that MSCI world is 70% US equities, and you look back and say, well, the last 10, 15 years you should have had nothing else but US equities. But I'm very interested in your thoughts on whether we're seeing some of those trends that we haven't really seen in the last 20 or 30 years starting to manifest themselves.

Jeff deGraaf:

I think the recycling of dollars in China and in the change or the decoupling if you will, the Chinese economy and the US economy is partly influential there. I think you're seeing, and look, president-elect Trump has talked about this, which is looking at punishing emerging markets that move away from Dollarization, right? So I think there has been a move away from Dollarization and you can blame it on deficits and debt and the like, but we're not substantially worse than the other G7. And obviously at least we've got some growth here, which still makes it more of a better steward than not for the dollar. I think, and this is a more personal philosophy, but I think gold is just another currency. It just doesn't have a central bank other than however much you can mine it at any given year. But I do think what we're seeing is just this wholesale depreciation of fiat currencies in the world and gold is just kind of an outlier there. So the dollar being strong might be the best house in a lousy neighbourhood, but it doesn't mean that it's great.

I'm actually encouraged by what we're seeing. Scott Besson being named Treasury secretary, I've known Scott for 30 years. He's pragmatic. He's a student of history, he understands these things. I know you are on the other side of when he helped Soros break the Bank of England. So he understands the interconnectedness of these things and what can happen and how things can be fine. We all know this. I mean, things sort of go along fine and all of a sudden just all hell breaks loose in financial markets. So you have to always be careful of pushing it just incrementally enough to not cause that chaos. So I think in the near term, some of that has been an improvement in bond yields here. I think it's been the stronger dollar, but I have a lot of confidence in what I'm seeing from this incoming administration and how they think about, or the people that they've put in place, how they think about defending the strength of the dollar. And really what that is, it's being a good steward of people's capital, both domestically and foreign. If you invest in dollars, you want to know that who's looking out for those dollars of those policies are going to be well-represented in the investments that you make. And I actually have a lot of confidence in who is going into those positions here to do that for us.

Moz Afzal:

Yeah, very, very interesting perspective. Yeah, spot on. I think pretty much the bond market in terms of bond yield, that lead peaked the day he was announced. And then since then they've been coming down very nicely and probably part of the reason why I guess your market cycle clock has only turned a little bit more bullish as well.

Jeff deGraaf:

Without question. I mean, look, and to your point on gold, I mean cyclicals, look at how industrials have performed here in the US with that strengthening dollar and with those higher yields. I mean, that is not something that should be happening, and it absolutely has been resilient in the face. Now we've seen home builders sell off and the like with that, and obviously there's a huge sensitivity to interest in some of these names, but for the most part I've been really, really impressed with the resiliency of what you consider more cyclical names that are a little bit more dollar and yield dependent hold up very, very well. And I think, again, that stabilisation within those two assets, the dollar and the long end of the curve, I think that sets the tone for a better 2025 if we can keep that maintained. And by that, I would say, I actually think it's really important that yields stay below 450 and they essentially stay above 375. I think if you start getting below 375, we're talking about potentially a recession, right? So I think this range is going to be important.

Moz Afzal:

Yeah, well, we'll certainly watch that very, very carefully. So Jeff, great talking to you. Some very, very interesting insights as always, and some bit of philosophy in there as well. So that's pretty cool. So Jeff deGraaf, thank you very much for coming on Beyond the Benchmark

Jeff deGraaf:

Most thank you for having me, and I look forward to next December.

Moz Afzal:

Well, maybe we could sneak in something a little bit early.

Jeff deGraaf:

Okay, fair enough.

Moz Afzal:

So Jeff, thank you very much. So thank you everybody for listening in to Beyond the Benchmark, and we'll be here again very soon. Thank you.

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