Thanks for the update, Bill. It looks like in a week or so everything starts to go down in tandem except bonds. A good time to pick up some gold and miners soon.
Yes, though I try not to take it too precisely. I would say we’re looking at a rough fourth quarter for stocks and probably first quarter next year as well. The opposite for Treasuries.
Either way I do like gold … and the more the current selloff is fulfilled in a way that resembles what’s penciled in the better.
One finer yet significant point: Notice that although Stocks continue their slide past April 15, they stop underperforming Bills. This means that in nominal dollar terms SS is projecting that the decline ends around that date. Of course we will have further updates before that time is reached and both the forecast and the outcome could be materially different, but regardless it’s important to bear in mind that SS is not dollar denominated; it’s strictly relative total returns.
This also applies to the Bonds and Gold outlooks … between their rising plots and the declining Bills plot, the projected bullish action is even stronger in nominal dollar terms.
Here’s the problem the stock market faces. Although we anticipated this rally, if it continues and stock prices really take off again, consumer price inflation will fail to come under control and the Fed will have to be more aggressive. The Fed call is still in play. The Fed put is still a ways down from here.
The only scenario in which inflation eases and the Fed doesn’t have to keep hiking is if the bear market continues. If it doesn’t, the Fed keeps hiking … round and round we go … heads I win tails you lose … this is the fundamental backdrop for the SS outlook.
The markets are all moving in the direction of Finster’s model today.
Stocks (S&P 500): -1.4%
Bonds (TLT): +1.4%
Bills (DXY): -0.2%
Lol if only one day made a trend! Yes the markets are cooperating nicely today. I’ll save the victory lap for a couple more quarters … looks to me like the real action is still a little ways off.
One thing is certain. The actual course of the markets over the next three quarters will not be exactly what SS predicts. But I will be surprised if they don’t follow the general course outlined; if bonds don’t solidly outperform stocks and gold doesn’t outperform copper.
A few notes about the SS plots … Stocks is the whole asset class, the entire world stock market. VT is probably the most accessible measure of that. Although it is true that foreign stocks are fairly well correlated with US stocks, not to mention that US stocks currently make up more than half the global market cap, so the difference is not huge. The Bills plot has no conventional analog … it is zero maturity UST relative to the other asset classes SS tracks (technically a weighted mean of all five), while DXY tracks the USD relative to a basket of foreign currencies. Nevertheless, there is a rough correlation. In SS Bonds is infinite maturity treasuries, which don’t actually exist (although perpetual bonds are sold by some issuers), while TLT tracks 20-30 year UST. Maybe surprisingly though, TLT comes pretty close, as also does VGLT and especially EDV.
There is no doubt though that Copper is copper and Gold is gold … just be aware that like the other SS graphs, they are not plotted in dollars but relative to a weighted mean of all five asset classes.