What is really cheap these days?

If I'm asking you what was the hottest sector in 2020, maybe unanimously I would hear the answer: Tech. Indeed Tech in general has been red hot for the whole last year even till now.

But the real champion in 2020 was not really tech but.....Bitcoin!

See the chart below which plots the ratio of QQQ (for tech) vs Bitcon. As it shows, while QQQ was doing relatively great before Oct last year, it has significantly lagged behind Bitcoin in the last quarter and relatively speaking, it was nosediving in the past few months performance in comparison to Bitcoin.  

Not only that, even in comparison to the worst sectors like banking and energy, it has underperformed lately. Recall what I said back in early Nov: Rotation has started!  

See below that this was indeed a spot on call as almost immediately financials have started to outperform techs in a big way. After such a good run, even banking and energy are not really cheap anymore.  

So what's the cheapest asset right now? Well, if compared to Bitcoin, nearly everything is cheap, right? See the ratio chart below, which shows that gold performance has been decimated by Bitcoin. But technically speaking, there is a sign of bottoming up for gold and it may be ready to catch up....probably in a big way!

Even in comparing to not so extreme asset like Bitcoin but to the general stock market, as you can see below that gold had been pushed down hard in the past few months but is also showing a promising sign of rebounding. As such, I think gold is probably the only asset right now that is relatively cheap and will probably start to rotate in a similar way as banking and energy a few months ago. 

Of course, gold is a volatile asset and there is no guarantee the persistent rally must start immediately. The bottoming process may take some time to complete but I like its prospect for 2021!