“We’re likely to see another year in which 12-month inflation numbers remain very uncomfortably high."
Since we last met, Equities, Commodities, Metals, and Currencies have behaved almost as picture-perfect relative to what we discussed in our last missive Taming The Bear Market. If you haven’t read it, get it now by clicking here.
So, there's that. And, that seems like a good thing for us as well as our readers considering the biggest question we are getting from individuals recently is:
“When is the stock market going to stop going down?”
And, considering the spike in rankings for search terms like “How to invest in a bear market?” We can see many people have woken up to the fact that markets are now officially considered to be in a “bear market”.
Hopefully, all those people find last month's RED ZONEwhich gives a step-by-step action plan on how to invest in a bear market. Check it out by clickinghere.
While Equities, Commodities, and Currencies have behaved in line with our expectations...Interest Rates on the other hand….. well… those pesky interest rates have been on a relentless rise as the U.S. 10 Year Treasury rate has just about reached 3.5% which is the high end of our forecasted range.
Do rates keep rising with 4% as an attractor? Or, are interest rates due for a pause, or even better, a reversal?
Buckle up buttercups and grab your readers because in this issue of From The Boardroom we are going to provide you with our outlooks on Equities, Metals, Commodities, Currencies, and ….yes, even Interest Rates for the remainder of 2022.
And, since the charts have been doing such a nice job of leading us thus far in the year, we are going to let the charts do most of the talking as we strive to answer the most popular questions we are hearing like:
“How much further is the stock market going to fall?”
“What’s next for interest rates? To the moon?”
“What about Gold? I keep getting emails telling me the Dollar is doomed and I should buy bullets, Butterfingers and Gold Bars, should I?”
“How high can Oil and Gas prices go? And, what can I do about it?”
Let’s get started with …
What about Gold? I keep getting emails telling me "The Dollar is doomed and I should buy bullets, Butterfingers and Gold Bars, should I?"
Even though this contributor is a fan of Butterfingers, Bullets, and Gold Bars on any given Saturday night…..acting on the rhetoric of a newsletter angling to get you to buy something probably isn’t the way investors are going to find the next investment wave.
In our experience from the 2000 and 2008 bear markets, there is a pattern that takes place in currencies and metals and the 2022 bear market seems to be following suit. So, keep the following in mind as you look for the next potential investment wave.
This bear market pattern entails the U.S. Dollar gaining strength accompanied by weak performance for metals in the first phase of the bear market followed by dollar weakness and strength in metals prices in the second phase of the bear market. By viewing the charts, it looks like the baton change from phase one to phase two may not be too far off in the future…
Bottomline when it comes to currencies and metals:
Eat the Butterfingers
Send the bullets to Ukraine
If the risk and time frame is appropriate for you, consider strategically adding or increasing exposure to metals and possibly decrease exposure to The US Dollar.
Curious to know if metals are right for your portfolio?
Yes, rates have been on a relentless rise all year.
Yes, every financial pundit is calling for higher interest rates.
No, they are not going to the moon. More importantly, historically speaking, interest rates are still low.
As you will see in the charts below, U.S. interest rates measured by the 10 Year Treasury Bond are basically in the same range they were in from 2008 to 2013. So what’s the big deal?
The big deal is rates are coming off of an artificially created low level and the move up has been fast, which creates fear and uncertainty for crayon-eating market participants.
In this missive, we won't bore you with the fundamental and geo-political reasons this is happening. You can catch that information at our upcoming event in Laguna Hills, CA on June 30th or the video we will be releasing the first week of July that will discuss things like “How China is affecting U.S. interest rates”.
For now, we go to the charts for more information on where interest rates may be headed for the rest of 2022.
Bottomline: Nothing goes in one direction forever. And, when any asset or market goes parabolic like rates have recently, it’s best to step back and rely on the fundamental rule of “reversion to the mean”.
At this point it appears rates are either headed to 4% or they are set up for reversal fairly soon.
Either way the charts have a lot of confluence in the 2% area. For this reason we have a sneaky suspicion that if the market wanted to surprise the most people, a drop to that level at some point in the next year would do it. Not a prediction, just something no one is talking about and we think it’s worth mentioning..
Stay tuned as we will keep you informed.
How much further is the stock market going to fall?
and 8pm and 9pm, and 10pm
It’s official, as of this past week (Mid June 2022) the S&P 500 and the Nasdaq are down more than 20% from their last peaks which places them officially into BEAR MARKETS.
For these contributors, it’s a big relief.
Since January, we have been discussing and preparing for this Bear Market. At certain points, early on, we were nervous that our analysis could be flawed. Now, we feel a bit vindicated and relieved that we were able to get ahead of this curve for our clients and readers. Now what?
Let’s go to the charts for some potential answers to that question.
(As a side note, we highly recommend you visit our past few missives in the archive to see our past charts. You can find the archives by clicking here.)
Bottom line: In the short term we are watching for signs that the equities markets could get some footing for a presumed bear market rally back towards 4100 on the S&P 500.
From there, we will watch for signs of whether the rally can continue to move higher or lose steam and reverse course to create a fifth wave lower that targets the 2800 to 3200 level on the S&P 500.
If this pattern plays out, it could be very valuable for those that may be feeling a bit nervous about their portfolios, or, those that may have had some shock and awe when they looked at their last account statements as it may allow some to adjust their portfolio allocation at potentially higher values before the market makes its next move lower.
Let’s wrap up this From The Boardroom with some bonus charts and the question…..
How high can Oil and Gas prices go? And, what can I do about it?
Let’s start with what many investors had left for dead after a decade-long bear market - Natural Gas. FIrst, a long-term chart that has the appearance that Natural Gas may be coming out of a secular bear market and starting a new long-term (secular) bull market.
Now, a shorter term chart that possibly shows us, that this presumed first secular wave higher in Nat Gas may be coming near an inflection point for a pause or short-term correction lower in price.
If Natural Gas is in the early phases of a secular bull market, the price channel drawn in the charts will be important to watch. In the short term, we are watching for prices to become more volatile with a possible test of the bottom trend channel support line. If this develops it can be very telling about the long-term intentions of Nat Gas prices.
At this point, investors of Nat Gas should be cheering for “more electric cars, bikes and airplanes” as the electricity for those items needs to be produced in some way and Nat Gas is probably the biggest winner in the electrification of everything trend.
Let’s close things up and shift gears by taking a look at oil prices and give you a few pointers on how to get some money back from the gas pump.
From the charts, OIL looks like it is in another secular Bull Market after being in a massive Bear Market the last handful of years. At this stage, OIL has earned itself a lot of wiggle room in the charts and prices can decline more than 10% from current levels and still be considered to be in a long-term Bull Market.
On the flip side, we believe the longer prices remain above $100 a barrel the $140 level looks like an attractor. The big question is, do OIL prices need to go lower before this attraction takes hold? Stay tuned as we will update you in the future From the Boardrooms.
Let’s assume the future sees prices that remain above $100 a barrel and eventually reach $140 a barrel. Other than turning tricks under a bridge for extra money, what can you do about fuel prices that could reach $8-$10 a gallon?
If your risk tolerance and time frame fit, and you have cash earning very little somewhere in your portfolio. Consider buying the dividend-paying stocks and bonds of the companies that will be screwing you at the gas pump when they dip in price. Quiver clients know we have already been doing this for you so fill up that motorhome and hit the road for summer, just don’t take my camping spot, they are hard to come by.
That is it for now, this contributor needs to pick his Old Man up from the train station for some Father's Day fun.
We hope as many of you as possible can join us on June 30th for lunch in Laguna Hills, CA. Click here to learn more and RSVP. Bring a friend so they can see how we have fun and do things Quiver style.
On a personal side:
Life for Justin, Patrick, and Colby has been smooth like butta. Justin is getting ready to kick off a big engagement party at the end of the month. Congrats to Justin and good luck to his fiance Amy :-)
Lastly, please welcome our most recent team member. Barkley Banks McFadden. Yes, we are a shop that believes in good ole fashion nepotism. Barkley will be helping us sniff out new investment opportunities. Until next time, take care of yourself and those you love.