Sunday, July 10, 2016

Markets: are we there yet? - 2016

Recently, it looks as though we are coming to a crucial point in the markets. 

Both US Stocks (S&P 500) and Bonds (global government bonds) are at All Time Highs.

Normally, when you are worried, you divests your stocks into bonds, so risk off.
when you are greedy, you sell your bonds and buy more stocks, so risk on.

However, developed markets government bonds yields are at all time low while US stocks are at all time highs. This is compounded by the persistent devaluation of developed markets currencies (less Japan) by the actions of central banks. On the other hand, you have all time lows in commodities with agricultural lows, energy coming off an all time low and gold and silver seemingly resuming their climb from more than a decade ago after the recent 4-5 years bear.

Summing up, we know that generally that

for bonds,

for currencies,

for stocks,

Note of caution: in trending markets, they can trend for a long long time.