I can make my main point this week by going heavy on visuals, light on verbs.
For starters, let's scroll through some technical indicators we've been tracking for years.
Here's a 30-year chart of the S&P 500 Index (white), its 50-day moving average in green (pretty much hugging the white line), 200-day moving average in blue, recessions shaded red, notice the circles:
"These are historical, all-time highs. However, with interest rates at historic lows, there is reason to suspect that "this time is different" may hold true."
And I get that -- that stocks can indeed trade at historically-high valuations when interest rates are at historic lows.
So let's take a look at interest rates (2-year treasury note yield), with the circles:
"The Fed's fear of bursting present asset and debt bubbles were it to implement traditional inflation-fighting measures -- thus willing to fall notably behind the inflation curve well into the foreseeable future. In fact, I personally place better than 50/50 odds that if indeed a long-term trend of rising inflation emerges, that the Fed will revert to yield curve control (buying up the price (down the yield) of longer-term treasuries) to control lending rates that, were they allowed to rise, would themselves produce a headwind to rising inflation."
Bottom line: While, indeed, much of our technical analysis says stocks are okay here, we're cognizant of the fact that valuations and the interest rate/inflation setup suggest otherwise.
And, make no mistake, $10 trillion dollars (so far) worth of global central bank printing (the lion's share from the U.S.) explains this historic anomaly. Hence our present lean toward assets that do well in an extended weak-dollar environment.Thanks for reading!