Winds of change? It’s more like a small breeze of change. Often the economy and markets do nothing different for extended periods and then, all of a sudden, there is an inter-connected change.
This is what is happening as we approach June, 2017:
- Inflation was growing steadily but it is now scooting sideways (see charts below).
- This is causing commodities, which are inflation dependent, to loose their bullish, late-stage appeal. The breadth (underlying strength) of both gold and oil has begun to fall.
- Emerging markets (commodity producers), which had caught a short-term bid, are likely to lose strength, all except for those countries that concentrate on technology production, such as India.
- As inflation and commodities begin to weaken this is slowly rotating more (temporary) strength into U.S. Treasury-bonds.
- Bonds are currently oversold and are likely to get a bounce within the next couple of months. We are close but not yet there.
- We are entering the (temporary) seasonally weakest period for stocks yet the underpinnings of the stock market are still remarkably strong and the calculated chance of a recession two months out is less than 4%, which means: NO RECESSION. (The two prior recessions were in 2000 and again in 2008 and both had drops of over 50% for the S&P-500 and much bigger drops for most other stocks; MarketCycle was correctly positioned during both of those drops.)
There are some periods, such as in 2014, where both Treasury-bonds and stocks are bullish and temporarily rise together. This is very good for investment accounts since both assets would be generating profits while the Treasuries would also protect against a drop in stock prices, a win/win situation. Again, we are not yet at that stage!
MarketCycle does NOT make investing/trading decisions based on trendlines (as below) but we do look at them daily (on over 200 individual proprietary charts).
INFLATION is now moving sideways (this proprietary system represents a lot of data put into one line):
GOLD is still bearish:
OIL is still bearish and Emerging Markets may weaken:
DOLLAR (USD) is still bullish:
STOCKS are still bullish. Stocks poked their head above overhead resistence (see triangle) which makes it more probable that they repeat the attempt and then move higher:
JOKE:
Thanks for reading! Remember that MarketCycle Wealth Management is in the business of managing (and protecting) YOUR investment account at an affordable price! Initial 3 month trial is at no charge.
You can SUBSCRIBE to this free blog by signing up on the website (no spam!).
Click on the Visit MarketCycle Wealth REPORT button on the website to reach our Daily MEMBERSHIP site.
Article by Stephen Aust, MarketCycle Wealth Management
