In 2019, every 3-4 days, one central bank somewhere around this spinning planet was cutting interest rates on its government bonds. Investors genuinely realized this passing year that the Federal Reserve was too early to tighten and is now too late to ease.
The result: the dollar is going to start its cyclical bear market.
Take a look at the formation of a technical pattern, which precedes large downward spirals.
Courtesy: U.S. Global Investors
When a central bank is igniting a liquidity rush, there’s more leverage in the system. The more debt-infused currency circulating, the less effective it becomes later, when a crisis demands intervention.
This is Portfolio Wealth Global’s main argument. We live in a central-bank-run economy, but investors factor this into their decisions, so they are not prepared for central banks to become ineffective.
What they’ve never had to grapple with is a world in which the FED injects funds, buys bonds or does some form of stimulus, and then NOTHING occurs.
Right now, by all accounts, the economy is doing well. We have 3.5% unemployment rate in the world’s largest economy. We see wages going up. The consumer feels comfortable. Had a central banker looked at this with fresh eyes, the reasoning behind cutting rates three times in 2019 would not be easily rationalized.
Look at what the FED has done in Q4 2019 – it pumped $3B every day into the financial markets.
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If the S&P 500 goes down by 5%, I will be adding to my position, personally.
The reason is that 2020 is set to be another great year for stocks:
January’s predictive ability is uncanny. Even with the WW3 scare, this year kicked off with a rally.
This means that we’re likely to see a positive year for stocks, in real terms.
It’s simple, really. Investing is about RELATIVE returns. The S&P 500’s dividend yield is higher than the coupon on the 10-yr Treasury bond.
When that happens, investors have historically preferred stocks over bonds.
Courtesy: U.S. Global Investors
But it’s NOT only stocks in 2020!
Gold, which has gone up on all but four calendar years this century, is likely to continue its ascent.
The most obvious reason is that central banks are buying boatloads of it!
In my years of tracking the gold market, I’ve seen many shocking trading themes. I don’t expect 2020 to be such a year. It should rise in price and it will. China and the U.S. have de-escalated, Trump has (most likely) avoided impeachment and the dollar is looking bearish.
Cash is trash in 2020!
Research Partner, PortfolioWealthGlobal.com
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Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.
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