The Ultimate Investor Update is your source for market information. If you’re looking for quick actionable market information – this is it!
For the purpose of getting you the best information, let’s recap the key points from the last update.
- Opinions change, so be flexible
- Gold versus the US dollar – correlation nonsense
- Bond holders jump ship
- Big bull market in stocks
As always, the goal of the Ultimate Investor Update is to give you objective market information as quick as possible.
In the meantime, this update comes in three parts: f/x, bonds and stocks.
Surely, markets can change on a dime. That’s for sure. So, it’s important to remain flexible. Many investors and traders fail because they do not respond to new information. Seriously, if you get punched in the face, do you stand there, or move?
F/X
Let’s take a look at the US dollar and gold.
Since the last update something big has changed. Surprisingly, the US dollar and gold are back to trading inverse to each other.
Notably the relationship changed around the time the Democrats locked up the Senate. Perhaps the US dollar’s five month slide was pricing in the big stimulus package touted by Joe Biden.
Clearly, gold is following the US dollar’s lead.
By and large, gold is not very appealing at the moment. After all, if gold could not rally during the US dollars decline and now the “inverse” relationship appears to be back on, stay clear of gold for now.
Bonds
Remember bonds trade inversely to interest rates. So, if rates rise the price of bonds fall.
Global Central Bank polices have not changed since the last update. Interest rates are still pinned at zero. However, interest rates have begun to creep higher. The US 10-year treasuries are now trading above 1%!
Indeed, this is a problem for the Central Banks, especially the Federal Reserve.
On the whole, even if rates are moving higher, investor’s can’t get out of the bond market fast enough. I coined the term Great Interest Rate Differential to help explain this phenomenon. For more information check out this post.
To be sure, it is hard if not impossible to find any value in the bond market.
Stocks
Welcome to the greatest bull market in history!
Even a global pandemic cannot stop the bull market. Well, let’s not get ahead of ourselves. It’s time to check yourself!
In other words, there are signs that a pause is in the works.
- 10 day moving average broken on heavy volume
- ADX no longer rising – rally taking a pause
- MACD crossover – rally taking a pause
Don’t get me wrong, I love technical analysis. But, it only provides us with anecdotal information. To clarify, stocks have been in rally mode since the US election back in November. Bottom line, stocks are due for a rest.
Conclusion
As I’ve said before, interest rates are a disaster for the bond market. Thank goodness the Federal Reserve is ready to buy any bond at any price regardless of quality.
In fact, investor’s can’t get their money out of the bond market fast enough. So, expect the bull market in stocks to continue, but wait for weakness to buy. All that money leaving the bond market has to find a home somewhere.
If you missed my last update, you can find it here.
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