It’s been about a month since I last published an Ultimate Investor Update. Nevertheless, I’ve been stuck in a lockdown combined with March break in April. Yes, you read that correctly! Things are upside down around here. Surely, everyone has been affected one way or another by this pandemic.
Moreover, a lot has happened since the end of March. For example,
- Biden Administration unleashed a massive stimulus package
- Elon Musk bought a billion dollars worth of Bitcoin
- Coinbase goes public
- Covid-19 pandemic continues to rage
- Stocks hit new all time highs
As always, the Ultimate Investor Update covers the big 3 sectors: F/X, bonds and stocks.
As a matter of fact, the behavior of these 3 markets can help savvy investors make big profits and avoid costly mistakes.
By all means, let’s dive in and see whether prices are going up or down.
F/X
One thing is for sure, creating a whole bunch of debt will put pressure on any currency. Surely, this is the main reason why the US dollar is under pressure once again. Although this may be true, the Biden Administration has signaled more debt creation is on its way.
Accordingly, holding US dollars in your investment portfolio has become a defensive play. Given these points, expect any strength in the US dollar to be short term in nature. If US dollar strength becomes persistent, then we have much bigger problems at hand, but that is not the case right now.
Bonds
Next, let’s move on to the bond market and get a feel for how interest rates are behaving. Now that a huge amount of US treasuries will hit the debt market to fund the Biden Administration’s stimulus, it’s interesting the see rates moving lower.
In spite of the massive stimulus, interest rates appear to be digesting the situation with ease. Regardless, US treasuries are a terrible investment as they offer a net negative real return. In other words, inflation will ravage US treasures for the foreseeable future.
Stocks
The stock market climbs a wall of worry. In other words, expect Financial TV networks to turn up the volume and amplify investor fear. As a result, expect the likes of David Rosenberg, and other perma-bears, to be paraded in front of the cameras. All in an effort to keep unseasoned investors second guessing and OUT of the stock market.
Don’t fall for the misinformation. A broken clock is right twice a day. What traditional economists fail to realize is interest rates no longer reflect the cost of capital. In this case, distorted interest rates destroy valuation models thanks to global zero interest rate policies.
Conclusion
All things considered, based on the charts above, stocks remain in a bull market. Surely, prices can get ahead of themselves. At any rate, any weakness in stock prices is a buying opportunity.
DISCLAIMER: Content provided in this article is for informational and entertainment purposes only. This article is not legal and/or investment advice. This article should not replace professional investment advice based upon your particular situation. Duties are not assumed, intended or created by this communication.
© 2021 mikehoganonline.com, All Rights Reserved
