What To Do When Markets Act Crazy
Let's face it, markets have been acting crazy.
Most people would think this applies to the stock market. Given the gyrations of recent weeks, including the recent 1-day 800 point Dow plunge, you can understand why.
But what about bonds? On the very same day the Dow dropped 800 points, the 30-year treasury bond yield dropped below its all-time low yield of 2.1% set in July 2016. And it didn't just edge lower. It dropped below 2% - all in a day. Yesterday, it settled at 2.08% It's clearly broken below it's previous low. And that means that those who swore the great bond bull market that began around 1980 was over are clearly wrong.
It does look like the trigger for the 800 point Dow drop and the drop in the 30-year treasury bond yield was all the talk about an "inverted" yield curve last week. The financial media played it up big time - specifically the fact that the 2-year yield rose above the 30-year yield. But, frankly, it all struck me as politicl chatter.
The financial media typically has a bug up it's you-know-what for Trump. And screaming about the inverterd curve allowed them to forecast a recession looming right around the corner. The thing is, that "inversion" lasted about a day. Yesterday, the 2-year yield was 1.53% vs. the 30-year yield of 2.08% - hardly an inversion.
On the other hand, the 3-month T-bill sits at 2.06%, a hair below the 30-year. Now that's something. It's not inverted, to be sure (i.e., it's not below the 30-year), but it's flat. We'll have to see if it remains flat.
BTW, one lesson from all this: You really shoule not pay attention when the financial media screams negative news like an immanent recession or a possible stock bear market around the corner - both items which would negatively impact a Trump re-election. Anything that could spell trouble for Trump is more likely ginned-up news - or to use the current term "fake" news - so best to ignore it.
Of course, that doesn't mean none of this could happen. It's just that the media's reasons for pushing it aren't based on fact or truth.
Oh, and if you missed this one: the price of gold rose around $100 in the space of 2 weeks. It's setttled down a bit since then. But $100 in 2 weeks is a lot. Did you hear anything about that? I didn't. The financial media didn't touch it. And the average investor apparently ignored it too.
Finally, add the following: All of Germany's bond yields are now negative. The same for Switzerland. That means no matter the term of the bond you buy you not only get no yield, but you pay the goverment in question for the privilege of lending them money.
Yields are negative in many other countries as well. Apparently 40% of all government bonds produce negative yields now.
(By the way, Swedish bond yields have been negative for 10 years. Who knew?)
All of the above, taken in aggregate, adds up to a crazy, mixed-up world at best. You might consider stock volatiliy more or less par for the course. You might excuse those who mistakenly thought teh bond bull had ended too. As for gold, well, few pay any attention to it most of the time, so that $100 rise without any fanfare shouldn't shock us.
But those negative yields? That's crazy.
So with all this swirling around us investors, what do we do now? Well, our last post talked about having some process in place, some discipline that guides your decision-making. If you've got that, you can hang on to it no matter what't happening. If you don't, super-anxiety and possible big losses may be waiting for you.
As for those of us who've got some sort of process and discipline. the worst thing you can do is stare at your screens and watch the fireworks day in and day out. You might try reading. Lately, I've had a good run of reads. And we're not talking about financial stuff either. Spread out your subjects. Include some classics, some fiction. Don't just read about money and markets.
Anything well-written from which you can glean some interesting information, even better some more substantive knowledge, and - best of all - some real wisdom, will serve you well. Your life will be enriched. Your temperment will be calmer. That's going to allow you to keep your head screwed on. You'll need it if the craziness continues. And it will.
Most people would think this applies to the stock market. Given the gyrations of recent weeks, including the recent 1-day 800 point Dow plunge, you can understand why.
But what about bonds? On the very same day the Dow dropped 800 points, the 30-year treasury bond yield dropped below its all-time low yield of 2.1% set in July 2016. And it didn't just edge lower. It dropped below 2% - all in a day. Yesterday, it settled at 2.08% It's clearly broken below it's previous low. And that means that those who swore the great bond bull market that began around 1980 was over are clearly wrong.
It does look like the trigger for the 800 point Dow drop and the drop in the 30-year treasury bond yield was all the talk about an "inverted" yield curve last week. The financial media played it up big time - specifically the fact that the 2-year yield rose above the 30-year yield. But, frankly, it all struck me as politicl chatter.
The financial media typically has a bug up it's you-know-what for Trump. And screaming about the inverterd curve allowed them to forecast a recession looming right around the corner. The thing is, that "inversion" lasted about a day. Yesterday, the 2-year yield was 1.53% vs. the 30-year yield of 2.08% - hardly an inversion.
On the other hand, the 3-month T-bill sits at 2.06%, a hair below the 30-year. Now that's something. It's not inverted, to be sure (i.e., it's not below the 30-year), but it's flat. We'll have to see if it remains flat.
BTW, one lesson from all this: You really shoule not pay attention when the financial media screams negative news like an immanent recession or a possible stock bear market around the corner - both items which would negatively impact a Trump re-election. Anything that could spell trouble for Trump is more likely ginned-up news - or to use the current term "fake" news - so best to ignore it.
Of course, that doesn't mean none of this could happen. It's just that the media's reasons for pushing it aren't based on fact or truth.
Oh, and if you missed this one: the price of gold rose around $100 in the space of 2 weeks. It's setttled down a bit since then. But $100 in 2 weeks is a lot. Did you hear anything about that? I didn't. The financial media didn't touch it. And the average investor apparently ignored it too.
Finally, add the following: All of Germany's bond yields are now negative. The same for Switzerland. That means no matter the term of the bond you buy you not only get no yield, but you pay the goverment in question for the privilege of lending them money.
Yields are negative in many other countries as well. Apparently 40% of all government bonds produce negative yields now.
(By the way, Swedish bond yields have been negative for 10 years. Who knew?)
All of the above, taken in aggregate, adds up to a crazy, mixed-up world at best. You might consider stock volatiliy more or less par for the course. You might excuse those who mistakenly thought teh bond bull had ended too. As for gold, well, few pay any attention to it most of the time, so that $100 rise without any fanfare shouldn't shock us.
But those negative yields? That's crazy.
So with all this swirling around us investors, what do we do now? Well, our last post talked about having some process in place, some discipline that guides your decision-making. If you've got that, you can hang on to it no matter what't happening. If you don't, super-anxiety and possible big losses may be waiting for you.
As for those of us who've got some sort of process and discipline. the worst thing you can do is stare at your screens and watch the fireworks day in and day out. You might try reading. Lately, I've had a good run of reads. And we're not talking about financial stuff either. Spread out your subjects. Include some classics, some fiction. Don't just read about money and markets.
Anything well-written from which you can glean some interesting information, even better some more substantive knowledge, and - best of all - some real wisdom, will serve you well. Your life will be enriched. Your temperment will be calmer. That's going to allow you to keep your head screwed on. You'll need it if the craziness continues. And it will.
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