A Bull Market Is Born

Tired of all this talk about bear markets?  All you need to do is expand your mode of thinking beyond stocks.  Let’s do that and see if we can find a bull market.

First a quick look back.  US Treasury bond prices hit a peak on July 5, 2016, and went into a bear market lasting over two years.  I have in mind the market weight of maturities from 1-30 years represented by the iShares fund GOVT.  This fund reached a peak price of $26.45, and declined as far as $24.05 on November 8, 2018.  I believe that to have been the bottom for this cycle.  That would mean a new bull market in US Treasuries was born on that date.  

Despite the ongoing financial media talk of a rising rate environment, I believe the rising rate cycle is over.  

Can we find any more bull markets?  After a four year bear market, gold prices bottomed on November 23, 2015, and have been zigzagging their way higher since.  After a bear zag for much of this year, the most recent low occurred on October 8, 2018; that is, just a few weeks ago.  Synthetic Systems projects further upside over the coming months.  A pattern of higher lows and higher highs constitutes a bull market.  

From the story standpoint, the case is that the bear market in stocks and weakening economic data will lead to easier monetary policy.  This means lower interest rates and a weaker dollar.  And bull markets in Treasury bonds and gold.  

In An Investing Primer, we outlined the case for a diversified portfolio including US stocks, foreign stocks, US Treasuries, and gold.  Because of the differing ways these asset classes respond to different economic environments, it’s rare to go very long without finding at least one in a bull market.  So if you find yourself discouraged by talk of a bear market, remember there’s always a bull market somewhere.

 

 

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