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Truly UNIQUE: This Marks The End, OFFICIALLY!
We will cover the results of the midterm elections and their impact on stocks, bonds, and commodities this coming Thursday, but one, critical and very determining new trend is already in place, no matter who takes control of the house. Without making any major headlines yet on the mainstream media, the bond market is, entering a bear market after 37 years.
From 1980 to present day, which is the real length of this cycle (38 years in a couple of months), bond prices have produced these returns for the decade of the 80s: 2.74%, 6.23%, 32.49%, 8.14%, 15.09%, 22.17%, 15.33%, 2.64%, 7.96%, and 14.28%.
Think about having a classic, 60/40 stocks and bonds portfolio, while both of these asset classes go up for an entire decade. Bonds didn’t have one losing year. Investors made a fortune.
Gold became irrelevant in the 1980s, therefore, going down from $850 to $386.
In the 1990s, stocks continued to soar, while bond prices kept going up, right along with them: 8.91%, 16.05%, 7.34%, 9.61%, -2.98%, 18.29%, 3.53%, 9.78%, 8.73%, and -0.84%.
The returns of the 1990s were uncanny, turning investors and hedge-fund managers into millionaires and billionaires in the span of a decade.
In 20 years, from 1980 until 1999, bonds had two down years, collectively -3.82%, which is unprecedented.
In the 2000s, while stocks were in a sideways market, bonds continued to enrich long-term bulls: 11.42%, 8.39%, 10.18%, 4.14%, 4.36%, 2.47%, 4.31%, 6.87%, 5.64%, and 5.91%.
Again, this is a full decade of positive returns, year after year.
From 2010 until 2017, only 2013 was a negative year for bond prices. So, since 1980, bond prices are up all but three years. This is the most obvious and prolonged bull market, and it is drawing to a close.
We’re now seeing bond yields going up, even in the face of an October, which should have seen yields dropping sharply, as safe haven trading should have been implemented, yet it wasn’t.
Bond yields are rising, no matter what – the bull market is over.
This brings with it a host of huge ramifications because it means that in the next recession, investors would probably not revert to a bonds portfolio, as a safe haven. But, with record $1T+ annual deficits, I’d bet they won’t like the idea of sitting on cash either.
As you know, Wealth Research Group is bullish on stocks, using October’s sell-off to add new positions. In fact, I purchased SPY (The S&P 500 ETF) yesterday and made it my biggest position.
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STOCKS FALL MOST IN RECESSIONS!
The Dot.Com recession was another -48.3% move. For most investors, 2008 will be the one they remember most, a -56.3% year.
None of the indicators I watch show that a recession is immediate. We can’t avoid having one in the near future, but this doesn’t mean it is underway right now.
Yet, investors are absolutely terrified.
The end of the bonds bull market means that in the next recession, which we will alert you on, at least six months ahead of time, using a combination of parameters we follow, neither stocks nor bonds will be the go-to asset class.
Think of the funds flow into commodities, as unemployment starts going up again, and inflation rises, due to ongoing government budget items, which don’t shrink in recessions, though tax revenues absolutely do.
There are several gold stocks, which I’ve been “sitting” on for a number of years. Nothing can provide for a better hedge to a general portfolio, while the major indices plummet in the coming recession, like exposure to inversely correlated diversified ideas, such as commodity plays.
Watch the 3.23% level for the 10-yr bond, for it confirms the breakout. We’re within striking distance of it.
This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. Information contained in this profile was extracted from current documents filed with the SEC, the company web site and other publicly available sources deemed reliable. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.