Following Up From Last Week
So if most of the market action the previous week really didn't go anywhere, what about last week?
Well, to state the obvious, stocks really hit the skids. Our models all showed slides of over 4% in their stock positions - and that's just for the week. Surveying some indicators published by our various sources, we're concluding that signals are mixed. That wasn't the case the previous week, when there really wasn't much solid evidence of gloom and doom. Not that it's all gloom and doom now. But with mixed signals, we might want to move from vigilant to hyper-vigilant.
As for bonds, well they're one reason we're not moving from hyper-vigilant to panic. When things really get bad, you'll find a strong, even overpowering, flow of money into bonds, specifically US government bonds. They're the big safe haven for traders when all else goes to the dogs. If there were a strong flow into bonds last week, yields would have fallen much more. They fell, but not by a lot. So at this point, we'll stick with the thesis that yields will remain in their rising trend, causing bond prices - over time - to fall. The "over time" is key here. There's no reason at the moment to think that bond prices are going to collapse. Indeed, if we're witnessing a reversal of the great bond bull market that began 1980-82, then it will likely take its sweet time transitioning to a bear market. After all, a move that's too dramatic would chase investors away. And bear markets, like stock markets, typically behave in such a way that investors, most particularly those who are reactive, will lose the most money. That's just what bulls and bear do.
Now gold, on the other hand, has continued responding rather positively, as we noted last week. We were curious whether the previous week's action really did signal higher prices to come. If last week is any indication, we'd have to answer "Yes!".
As for those of you in "buy and hold" mode, a quick comment. I understand your desire to be disciplined and stick with your chosen strategy. If you're "buy and hold," you do just that. And you've seen and been told by your advisors time and again to hang in there. Sure, you'll take "some" losses; but over time, stocks will rebound. (We're referencing stocks simply because they're the main subject of such conversations, although the same could be said of other asset classes.)
You're likely further told that "market timing" is a losers game. Put another way, you "can't time the market." And, of course, if that's true, then the only way to handle your money would be to follow the "buy and hold" strategy. Either that or just avoid investing in stocks altogether, if the prospect of losing 50% of your money in a bear market doesn't appeal to you - which recently happened to stock investors in 2000-2002, and again in 2008-2009.
As long as that all makes sense to you, more power to you. I wish you well. Just remember that there's another side of the story to the buy-and-hold-you-can't-time-the-market argument. Those on the other side proffer "TAA" - tactical asset allocation. You may want to look into it. If we're not heading into a bear market right away, you'll have some time to do the research. When we do head into a bear market - and we will at some point - your research may pay off.
Makes sense to me.
Well, to state the obvious, stocks really hit the skids. Our models all showed slides of over 4% in their stock positions - and that's just for the week. Surveying some indicators published by our various sources, we're concluding that signals are mixed. That wasn't the case the previous week, when there really wasn't much solid evidence of gloom and doom. Not that it's all gloom and doom now. But with mixed signals, we might want to move from vigilant to hyper-vigilant.
As for bonds, well they're one reason we're not moving from hyper-vigilant to panic. When things really get bad, you'll find a strong, even overpowering, flow of money into bonds, specifically US government bonds. They're the big safe haven for traders when all else goes to the dogs. If there were a strong flow into bonds last week, yields would have fallen much more. They fell, but not by a lot. So at this point, we'll stick with the thesis that yields will remain in their rising trend, causing bond prices - over time - to fall. The "over time" is key here. There's no reason at the moment to think that bond prices are going to collapse. Indeed, if we're witnessing a reversal of the great bond bull market that began 1980-82, then it will likely take its sweet time transitioning to a bear market. After all, a move that's too dramatic would chase investors away. And bear markets, like stock markets, typically behave in such a way that investors, most particularly those who are reactive, will lose the most money. That's just what bulls and bear do.
Now gold, on the other hand, has continued responding rather positively, as we noted last week. We were curious whether the previous week's action really did signal higher prices to come. If last week is any indication, we'd have to answer "Yes!".
As for those of you in "buy and hold" mode, a quick comment. I understand your desire to be disciplined and stick with your chosen strategy. If you're "buy and hold," you do just that. And you've seen and been told by your advisors time and again to hang in there. Sure, you'll take "some" losses; but over time, stocks will rebound. (We're referencing stocks simply because they're the main subject of such conversations, although the same could be said of other asset classes.)
You're likely further told that "market timing" is a losers game. Put another way, you "can't time the market." And, of course, if that's true, then the only way to handle your money would be to follow the "buy and hold" strategy. Either that or just avoid investing in stocks altogether, if the prospect of losing 50% of your money in a bear market doesn't appeal to you - which recently happened to stock investors in 2000-2002, and again in 2008-2009.
As long as that all makes sense to you, more power to you. I wish you well. Just remember that there's another side of the story to the buy-and-hold-you-can't-time-the-market argument. Those on the other side proffer "TAA" - tactical asset allocation. You may want to look into it. If we're not heading into a bear market right away, you'll have some time to do the research. When we do head into a bear market - and we will at some point - your research may pay off.
Makes sense to me.
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