The equity maket sectors are getting more disperse

Using the v-Lab data, we are seeing that correlations across sectors in the US are falling and showing more dispersion. If the stock market, like all markets, can be viewed as a network, we are seeing the network expanding after a period of strong connection in the first quarter of 2025. We are seeing a disconnect in the IT sector but also across real market sectors. This can be viewed as a market for stock pickers.

 

Gold taking up the slack of lower dollar central bank demand

At some point, the fiat money producers will believe that fiat money is losing its value. There will not be an announcement, but there will be a slow adjustment. Look at the reserve assets held. Central banks are expected to reduce their exposure in dollars. They have already seen an increase in gold holdings. Now you have to be careful when looking at gold, because a large percentage of the increase in reserve exposure is not from more tonnes of exposure but through an increase in price. 

That said, most central banks as of mid-June expect that gold will move moderately higher even after the poor second quarter. Will we see the highs from January and February this year? Unlikely, but there is more upside than downside for gold in the second half of the year.