The Week That Was: Significant Shift?
Stocks, bonds, and gold all moved significantly this past week. After weeks of ups and downs which saw all-time highs, one after the other, in the stock market, we got some negative drag. Or was it more than just a drag? Could it be a harbinger of worse to come?
For bonds, the higher yields that marked the last few weeks reversed abruptly. While the stock market got all the attention - as usual - yields not only dropped like a rock, but we got another Inverted Yield Curve. Yeah, in case you missed it, that happened last week. We had an Inverted Yield Curve last year. "Recession" was in the air. Then it normalized and the R-word was dropped from the vocabulary. Either made no sense. On the rare occasions when Yield Curves have inverted post-World War II, recessions did follow - but not for a while. And every time the curve normalized before the recession hit. I'm not sure whether, an initial inversion turned normal, we got another one before a recession. And I don't have time to do the research. In any case, it hasn't much, if any press, this time around, like it did last time. The "Coronavirus" gets all the talk now.
Gold hasn't been much in the news, but it chugged a lot higher in the midst of all this. After forming what could be considered a "high pole" end of 2019 going into 2020, it had been consolidating. That, or an outright correction, would be typical action after such a big, quick rise. You can see in this chart why that sort of rise has been dubbed a "high pole" by the technical analysts among us.
All of this has been attributed to the coronavirus. I'm not so sure.
The virus itself isn't something to be sneezed at. It's a serious matter. The question is, will it become a real threat to the world economy. Frankly, I'd be happy if it did, rather than a huge threat to us. That weighs more on my mind than whether economic activity slows down. You have to have your priorities straight, right?
For now, we don't know how this disease will develop. We know it's nasty, a killer. What we don't know is how bad it's been in China, where it originated. The Chinese government has never been an honest, reliable source of information . And we don't know how much it's spread so far, nor how much we might expect it to spread going forward. All of this remains an unknown. We should all pay attention.
But don't pay attention for economic or financial reasons. Pay attention because it may become a threat to your personal welfare and that of your family.
As for the financial markets, the coronavirus was a catalyst to what was a trend in the making. Stocks were due for a correction. Bond yields - if their continued bull market was to remain intact - were due to drop. As for gold, if it's commenced the next leg in a historic bull market that began in 2000, we should be seeing higher prices coming. Not necessarily straight up to the sky, but higher over the next couple of years - at least.
But how significant was all this? Well if the above remarks are correct, not much really. A correction in stocks doesn't negate the possibility of a continued "Melt-Up"; the fall in bond yields only confirms the bond market continued strength, with any change in long-term trend to the downside put off for now - yet again; and the rise in gold prices only confirms what we've suspected since prices began rising last year: the precipitous fall in gold prices that began in 2011 was not a bear market, but a correction in the historic gold bull market that began in 2000.
So that means the price action this past week didn't change a thing.
With all that in place, the week that was now transitions into the week to come.
For bonds, the higher yields that marked the last few weeks reversed abruptly. While the stock market got all the attention - as usual - yields not only dropped like a rock, but we got another Inverted Yield Curve. Yeah, in case you missed it, that happened last week. We had an Inverted Yield Curve last year. "Recession" was in the air. Then it normalized and the R-word was dropped from the vocabulary. Either made no sense. On the rare occasions when Yield Curves have inverted post-World War II, recessions did follow - but not for a while. And every time the curve normalized before the recession hit. I'm not sure whether, an initial inversion turned normal, we got another one before a recession. And I don't have time to do the research. In any case, it hasn't much, if any press, this time around, like it did last time. The "Coronavirus" gets all the talk now.
Gold hasn't been much in the news, but it chugged a lot higher in the midst of all this. After forming what could be considered a "high pole" end of 2019 going into 2020, it had been consolidating. That, or an outright correction, would be typical action after such a big, quick rise. You can see in this chart why that sort of rise has been dubbed a "high pole" by the technical analysts among us.
All of this has been attributed to the coronavirus. I'm not so sure.
The virus itself isn't something to be sneezed at. It's a serious matter. The question is, will it become a real threat to the world economy. Frankly, I'd be happy if it did, rather than a huge threat to us. That weighs more on my mind than whether economic activity slows down. You have to have your priorities straight, right?
For now, we don't know how this disease will develop. We know it's nasty, a killer. What we don't know is how bad it's been in China, where it originated. The Chinese government has never been an honest, reliable source of information . And we don't know how much it's spread so far, nor how much we might expect it to spread going forward. All of this remains an unknown. We should all pay attention.
But don't pay attention for economic or financial reasons. Pay attention because it may become a threat to your personal welfare and that of your family.
As for the financial markets, the coronavirus was a catalyst to what was a trend in the making. Stocks were due for a correction. Bond yields - if their continued bull market was to remain intact - were due to drop. As for gold, if it's commenced the next leg in a historic bull market that began in 2000, we should be seeing higher prices coming. Not necessarily straight up to the sky, but higher over the next couple of years - at least.
But how significant was all this? Well if the above remarks are correct, not much really. A correction in stocks doesn't negate the possibility of a continued "Melt-Up"; the fall in bond yields only confirms the bond market continued strength, with any change in long-term trend to the downside put off for now - yet again; and the rise in gold prices only confirms what we've suspected since prices began rising last year: the precipitous fall in gold prices that began in 2011 was not a bear market, but a correction in the historic gold bull market that began in 2000.
So that means the price action this past week didn't change a thing.
With all that in place, the week that was now transitions into the week to come.
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