All-Stars #104 Brent Johnson: Dollar, SPX, Gold & Commodities update

Episode Summary

Executive Summary: Eric Townsend interviews Brent Johnson on May 11, 2020 about macro positioning after the COVID crash. Johnson remains structurally bullish on the U.S. dollar, cautious on commodities and emerging markets, and constructive but less certain on equities. He still favors owning gold long term, but expects it can be sold during dollar-driven liquidity stress and sees near-term risks from rising real rates and extreme positioning.

Main Topics: U.S. Dollar Outlook (Priority: 5/5): Johnson argues the dollar’s long-term uptrend is intact despite recent pullbacks, and believes it will continue to drive global asset prices over the next several years. Equities After the COVID Crash (Priority: 5/5): He says stocks hit the lower end of a long-term channel, rebounded sharply, and may revisit the channel bottom, but he still expects a broader move to new highs over the next couple of years. Gold and Gold Miners (Priority: 5/5): Johnson remains structurally bullish on gold but sees short-term vulnerability if the dollar spikes again. He is cautious after the sharp rebound in bullion and miners and prefers to wait for a better entry in mining stocks. Commodities and Emerging Markets (Priority: 4/5): He views commodities as technically weak and fundamentally pressured by deflation and a stronger dollar, making EM and commodity allocations unattractive for now. Liquidity, Swap Lines, and Dollar Weaponization (Priority: 4/5): Johnson highlights the strategic role of dollar liquidity and suggests countries without U.S. dollar swap lines may see their industries, including gold miners, used as sources of dollars. Positioning and Risk Management (Priority: 3/5): He emphasizes that his views are conditional, especially for gold: long-term bullishness remains, but short-term liquidation events can still force downside moves.

Key Arguments: The U.S. dollar has been remarkably strong and is likely to move much higher over the next couple of years, making it the central macro variable for global assets. Equities have likely entered a multi-year recovery path, even if they first retest the bottom of the long-term channel and frustrate bears along the way. Gold remains an essential portfolio asset, but it can still decline during broad liquidation events when investors need cash, especially if the dollar spikes again. Gold miners may be a better long-term opportunity than bullion at times, but Johnson prefers patience and suggests evaluating mine geography and access to dollar swap lines. Commodities look bearish right now because the dominant force is deflation, not inflation, and a stronger dollar should pressure them further. Countries without access to U.S. dollar swap lines may face more severe liquidity stress, potentially forcing local assets and exporters into dollar-generating roles.

Data Points: Recording date: May 11, 2020 - Episode date for Macro Voices All-Stars 104 Dollar performance year-to-date: Up about 4% to 5% - Johnson notes the U.S. dollar is one of the best-performing assets of the year Dollar level threshold: Above 100 - Johnson says he is encouraged that the dollar is above 100 Dollar resistance level referenced: 104 - Townsend and Johnson discuss the dollar not yet breaking above 104 Equity drawdown after channel touch: Another 10% down - Johnson says equities fell about 10% after he removed hedges Gold pullback level: 1450 - Gold sold off during the March liquidity event Gold breakout level mentioned: 1400 - Johnson had expected a retest of the 1400 level Gold pullback timing: Last month / March - He links the gold correction to the dollar’s spike and market liquidation Long-term equity channel: 10-year channel - Johnson references a decade-long technical channel for equities Gold miner positioning metric: Commercial shorts as a percent of OI have never been higher in history - Johnson cites COT positioning as a risk for gold

Pivotal Quotes: "I still think the whole world is going to be driven by what the dollar does over the next couple of years. And I still think it's going much, much higher." — Brent Johnson: His core macro thesis on the U.S. dollar "My gut tells me we're going to go back down and test the bottom of that 10-year channel." — Brent Johnson: His near-term view on equities after the rebound "I think if gold doesn't break out definitively in the next couple of months, then we probably got a going to have some trouble in the fall." — Brent Johnson: His short-term caution on gold despite long-term bullishness

Implications: Listeners should expect dollar strength to remain the key cross-asset driver, favoring caution on commodities and EM. Equities may grind higher despite volatility, while gold stays strategic but vulnerable to liquidity shocks and positioning-driven pullbacks.