Summary
Phil Anderson argues that the real estate cycle is in its late stages, with a strong economy driving cyclical stock breakouts and a potential resurgence of inflation into 2026. He identifies commodities as the key sector to watch, noting that a commodity breakout relative to the S&P 500 has historically coincided with the final year of the cycle’s upswing.
Key Claims
- Small-cap stocks, banks, and housing-leveraged companies (Lowe’s, Home Depot) are breaking out in the U.S., consistent with late-cycle behaviour — confidence: high
- U.S. CPI was 2.6% year-over-year as of the email date, down from 9.0% in June 2022, but the rate of change is turning higher again — confidence: high
- Apollo chart comparison suggests this CPI cycle is tracking closely with the 1970s inflationary pattern, implying another inflation wave into 2026 and beyond — confidence: medium
- Commodities (GSG) have traded in a flat range for over two years and an inflation upturn could catalyse a breakout — confidence: medium
- In the prior two real estate cycles, a spike in the commodities-to-S&P 500 ratio occurred during the final year of the cycle’s upswing — confidence: medium
- A GSG breakout above $23 could confirm late-cycle positioning and represent a trading opportunity — confidence: medium
- Deere & Company (DE) surged from a base established in 2022, consistent with late-cycle economic strength — confidence: high
Mex Pete References
- Small-cap stocks and banks in the U.S. are described as breaking out “often from Mexican Pete patterns.” No individual small-cap or bank ticker is named in connection with a specific Mex Pete setup.
- Lowe’s (LOW) and Home Depot (HD) are mentioned as breaking out but are not explicitly labelled as Mex Pete patterns.
Stock Picks / Signals
- DE (Deere & Company) — Bullish; surged from a multi-year base dating to 2022. No specific price target or stop loss given.
- LOW (Lowe’s) — Bullish breakout noted. No price target or stop loss given.
- HD (Home Depot) — Bullish breakout noted. No price target or stop loss given.
- GSG (iShares S&P GSCI Commodity-Indexed Trust ETF) — Watching for breakout above $23 as a buy signal and late-cycle confirmation. No stop loss stated.
Predictions / Forecasts
- Another wave of inflation expected into 2026 and beyond, based on CPI cycle comparison with the 1970s.
- A spike in the commodities-to-S&P 500 ratio during late 2025 into 2026 would signal the real estate cycle’s final days, consistent with the pattern seen in the prior two cycles.
- GSG breakout above $23 anticipated as a potential catalyst once inflation re-accelerates.
Notable Quotes
“If and when they break out, that could signal the end of the real estate cycle’s 14-year upswing.”
“A breakout over $23 could present a trading opportunity, and confirm our place late in the cycle.”