The rise in bond yields since last month’s market correction could be good news for investors, but the challenge comes in identifying the point at which the trend could be bad for shares. This according to a recent article in The Wall Street Journal. Whereas bond investors previously thought that tax cuts would boost inflation, the article says they now seem to be anticipating a better long-term economic outlook with lower inflation expectations. However, it… Read More
Hedge fund manager Paul Tudor Jones believes that inflation is “about to appear ‘with a vengeance’ and may force the new Federal Reserve chair to accelerate interest-rate hikes,” according to a recent article in Bloomberg. According to the article, Tudor wrote in a recent note to clients, “We are replaying an age-old storyline of financial bubbles that has been played many times before.” He believes that policy makers should have pushed for tightening policy and… Read More
For the past two decades, government bonds have moved in the opposite direction of equities in the short run but have produced similarly strong gains in the long run, representing a nearly “perfect” investment, according to a recent article in The Wall Street Journal. From the beginning of 2000 to the end of 2017, the article says, “holding the latest 10-year Treasury and reinvesting coupons returned 155%, the S&P 500 with dividends 158%, while a… Read More
As many expect the current bull market to last longer, Pimco global economic adviser Joachim Fels recently told Bloomberg TV, “The fact that the fear is gone is the main reason why we should be worried.” Fels argues that interest rates could rise faster than expected, pushing up government bond yields, and inflation could bump up. The fact that fear is at a low, he says, “means most investors are now pretty fully invested and… Read More
The failure of central-bank models to forecast the slowdown in global inflation “leaves investors in the dark about the most important economic measure today and why it’s so low,” according to a recent article in The Wall Street Journal. Contradictory messages from the bond, equity and commodities markets is “adding to the confusion from central banks struggling with the breakdown of their inflation models,” the article says. The yield curve has been flattening such that… Read More
While gold has been the popular inflation hedge over the past ten years, copper was a better bet according to a recent Bloomberg article. “While data show that broad community indexes provided the best bang for the buck during periods of rising costs in the U.S., the red metal stands out. According to the article, for every 1% annual increase in the consumer price index since 1992, copper rose by nearly 18% compared to 5.2%… Read More
The best scenario for investors is steady and low levels of inflation that ward off deflation but also discourage central banks from hiking rates too rapidly, says a Wall Street Journal article from last month. So far, the article asserts, “Trumpflation” has been embraced by deflation-fearing investors—but shareholders should be “keeping a watchful eye on consumer prices, as they often rise much faster than anticipated.” Richard Turnill, chief investment strategist at BlackRock Investment Institute, argues… Read More
Along with its recent rate increase, the Fed has upgraded its growth and inflation forecasts—and this could bode well for commodity stocks, writes Validea CEO John Reese in in his article this week for Nasdaq. Reese cites a tighter labor market, stabilizing oil prices and slowing appreciation of the U.S. dollar as potential contributors to inflation, and cites AAII Journal data pointing to a strong outlook for commodity stocks: He identifies five commodity stocks worth… Read More
The results of a study on asset performance during periods of both low and high inflation are presented in this month’s issue of AAII Journal by Craig Israelsen Ph.D and developer of the 7Twelve Portfolio The median level of inflation used was 3.29%, as it allowed researchers to divide the 46-year period between 1970 and 2015 in half: 23 years with below-median inflation and 23 years with above-median inflation. Findings showed that during the period of low… Read More
As the S&P continues to hover at record high levels, the question remains as to how long it can continue. In a recent article for Forbes, Jurrien Timmer, Director of Global Macro at Fidelity Investments, outlines what he sees as five potential market scenarios down the road: Secular stagnation: The status quo—”a continuation of the slow-growth, low-inflation regime that has been in place since the global financial crisis ended.” Deglobalization: Post-Brexit, Timmer sees potential for… Read More