The law of gravity prevails
This is a good time to take a step back and take a look at how far markets have come in the last five years. I have in mind especially stocks, which I’ve characterized as being in a bear market. And to strip away the distorting effects of contracting currency units, I will plot them priced in gold. Index ETFs are handy for this purpose; specifically this is a price chart of VT relative to IAU via StockCharts [updated 0402]; in short the world stock market in terms of real money.
Stocks are essentially back to where they were in the wake of the deflationary crash associated with the 2020 Covid panic. Stock investors have earned a real return of about 1.9% associated with the dividends they received. Those who bought at other than near the March 2020 lows fared more poorly.
What happened in between was an excursion into fantasy fueled by a money binge and media hype.
It’s a been a round trip to reality.
The bear market may yet have room to run, but this chart suggests it may not be too early to start nibbling at stocks, particularly for those of us who have been allocated below our targets based on overvaluation and the evolution of the yield curve. A measured pace may be appropriate … as discussed last fall, the length and depth of that inversion would be consistent with a commensurately long and deep bear market, suggesting this may be just the opening act.
Of course readers who know just when the bottom tick is in should feel free to back up the truck;-).
In terms of real money, the US dollar is plumbing all time lows.
For those who prefer to contemplate bull markets, gold has just hit an all time high of $3165.52.