alternative markets update June 2021

​Inflation is one of the most important topics in 2021. The rise in inflation is all but surprising given the central bank interventions of last year. Inflation is as high as it has not been for the past ten years. However, current inflation levels are not of huge concerns, but rather what levels could be reached given unprecedented money printing since Covid-19. Consequentially, many large investors have made moves towards gold and Bitcoin (BTC). Equity markets have also rising tremendously, perhaps already incorporating potentially high inflation in the coming year(s). Figure 1 shows the inflation rate in the US since 1915. In the last 30 years, inflation was rarely higher than it is currently, but the potential of ballooning is substantial. For example, inflation is only slightly lower than it was at the peak of the financial crisis in 2008, but the interventions this time were multiple times higher than back in 2008. Alongside, the more outstanding money, debt of government has also skyrocketed, as governments had to fight the devastating economic impact Covid-19 brought. Figure 2 shows the debt to GDP ratio of most countries. Most developed economies, except the Scandinavian countries and Switzerland, have surpassed a ratio of 50%. Another substantial number of countries have even surpassed the 100% mark, e.g. the UK, the US, and France. The highest ratio is from Japan with 257%.

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RESEARCH PERSPECTIVE VOL. 157 June 2021 Alternative Markets Update June 2021 Inflation is one of the most important topics in 2021. The rise in inflation is all but surprising given the central bank interventions of last year. Inflation is as high as it has not been for the past ten years. However, current inflation levels are not of huge concerns, but rather what levels could be reached given unprecedented money printing since Covid-19. Consequentially, many large investors have made moves towards gold and Bitcoin (BTC). Equity markets have also rising tremendously, perhaps already incorporating potentially high inflation in the coming year(s). Figure 1 shows the inflation rate in the US since 1915. In the last 30 years, inflation was rarely higher than it is currently, but the potential of ballooning is substantial. For example, inflation is only slightly lower than it was at the peak of the financial crisis in 2008, but the interventions this time were multiple times higher than back in 2008. Alongside, the more outstanding money, debt of government has also skyrocketed, as governments had to fight the devastating economic impact Covid-19 brought. Figure 2 shows the debt to GDP ratio of most countries. Most developed economies, except the Scandinavian countries and Switzerland, have surpassed a ratio of 50%. Another substantial number of countries have even surpassed the 100% mark, e.g. the UK, the US, and France. The highest ratio is from Japan with 257%. Figure 1: US Inflation’s Ups and Downs, Source: U.S. Bureau of Labor Statistics, June 2021 Figure 2: Global Debt to GDP Ratio in 2021, Source: HowMuch.Net & IMF, June 2021 The yield curve steepening from early 2021 has stopped and reversed slightly over the past weeks. At the beginning of 2021, in particular long-term US interest rates have strongly increased. After the initial surge, the increase stopped and has now corrected slightly. Figure 3 gives some insights into the development of global interest rates. Short-term interest rates barely moved in 2021 with the exception of US rates, which shortly gained quite a lot, but lost it again soon after. Global long-term rates have gained almost 1% over two months but have since than remained constant and are falling again since June 2021. UK gilts show a similar development, while for example German bunds had a smaller move and are still in the negative territory. Figure 3: Global Interest Rates Over Time, Source: Barrons Statistics & Tradeweb ICE US Treasury Close, June 2021 In general, June 2021 so far has been a relatively quiet month. In the given ecosystem, gold seems to move counterintuitive, despite being at a historically very high price, especially in the context of unprecedented money printing and record-breaking equities. Figure 4 shows the commodities-to-equity ratio over the last 40 years. The ratio suggest that commodities are worth the least compared to equity in the last fifty years. Gold surged substantially in May 2021 and hit the $1,900 mark again before dropping again in June 2021. Another seemingly positive indicator, the weak phase of crypto, which has been argued that it was one of the factors for the decline in gold in early 2021, should imply that gold should be again more attractive. However, this implication does not seem to hold based on the current development of gold. In comparison to gold, oil is still doing very well and continues to rise since it collapsed at the beginning of Covid-19. Since then, oil has increased steadily and WTI crude oil surpassed the $70 per barrel for the first time in years. Figure 4: Commodities to Equities Ratio, Source: Incrementum AG & Crescat Capital LLC, June 2021 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Dubai and Umm Al Quwain in United Arab Emirates. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). In private assets, we advise 10+ sponsors and general partners across private equity, venture capital, private credit, real estate, capital relief trades (CRT) by structuring funding vehicles, rating advisory and private placements. As of 16th February 2021, Stone Mountain Capital has total alternative Assets under Advisory (AuA) of US$ 60.3 billion. 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