Wal-Mart and the "Deflation Pulse"

The price performance of Wal-Mart's stock relative to the S&P 500 may be confirming what chief investment strategist Michael A.Gayed calls a "deflationary pulse."

Here's an excerpt from Gayed's August 1, Marketwatch article:

Historically, when inflation expectations are falling, what I like to call a "deflation pulse," risk assets tend to have a difficult time advancing. Bear markets and corrections, for the most part, are defined by deflationary/liquidity scares, while reflation (or at least the hope of it) tends to define gradual uptrends for stocks. Clearly this has not been the case in the post-quantitative-easing (QE3) world, given that inflation-sensitive assets never really outperformed despite continued bond buying by the Federal Reserve.

Having said that, we are all living in the small sample, and historical relationships appear to be reasserting themselves. While 2014 thus far looks and feels like 2013 for the S&P 500, nearly all other areas of the investable landscape are acting very differently. A casual look at where long-duration Treasury yields are proves that. Utilities, which our equity sector ATAC Beta Rotation Fund has been trading around this year, remain fairly resilient, once again at complete odds with the narrative about cyclical economic growth picking up.

Aside from utilities and Treasuries both acting as if a deflation pulse is lurking for broader equities, Wal-Mart may now be about to confirm.

Gayed presents a chart that shows the price ratio of Wal-Mart relative to the S&P 500 index.

You can read Gayed's comments about the chart and the remainder of the article by following the link below.

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