Currently, the long-term uptrend in price (support) has just been broken. The big question now: could we see a repeat of 1978-1980? Be sure to realize this is the yield, which is the inverse of the price. “This is not a financial crisis,” said Brian Moynihan, chief executive of Bank of America. That’s almost 36 years, definitely extremely long for any bull market. Then it remains to be seen if the negative effect of higher interest rates will be more powerful than the beneficial effect of a stronger economy and sharply rising corporate earnings. the rate against which ALL risk is measured, in stocks, commodities, corporate bonds and mortgages, among other asset classes. “We are having to fix a problem that four weeks ago nobody thought would be a problem,” he said. It will end badly. Besides worries about the virus and the government’s ability to get something done for the economy, the market was also weighed down by a continued decline in oil prices, said Patrick Schaffer, global investment specialist at JP Morgan Private Bank. Inflation surged to over 15%. Now we are hitting a patch. All of us, at some point, must confront our mortality. That would have very important implications for all the markets, and great pain for big bond investors. The Dow Jones Industrial Average has had six days in the last few weeks where it swung up or down by 1,000 points or more, not including Wednesday. We are going to do something about getting rid of this virus as quickly as possible. However, nothing is forever. Could it happen again this time? There is an old saying, “History doesn’t necessarily repeat, but it often rhymes.” Well, for me, it has been rhyming for months. Take the notion that a 9-year-old bull market is more likely to come to an end than one that is 2 years old. Randall W. Forsyth. The Dow has done that only three other times in history. A strong confirmation of bond prices being in a bear market would be the early 2017 low in the TLT. That would have very important implications for all the markets. I warned in January, regarding the chart of the 10-yer Treasury-bond yield: For us, this very long-term pattern says that yields will go higher, perhaps much higher. To claim this wasn't a short-term bear market in the context of a long-term secular bull market seems like a stretch if you're using the 20 percent definition. When that is penetrated decisively to the downside, bond investors will feel severe pain. The big question: will that change now with the new economic policies coming from the White House? It is exceeded by the bull market that started in 1990 and lasted nearly nine and a half years. U.S. Treasury bond prices have been in a bull market since 1982. Nine years into it, and we have barely had a correction. 5 Reasons Bull Markets End We tell you the signs to look for and what they’re signaling now. On Wednesday investors sold off shares across all sectors after the World Health Organization declared the outbreak a pandemic for the first time and criticized “alarming levels of inaction” by governments in corralling the virus. But so far, all of their efforts, and the creation of trillions of dollars of artificial credit, have not done the job. This would be another secular tidal wave of change, yet the first one for bonds in 36 years. Furthermore, I said it would cause a big rise in gold and silver prices, along with commodities. (I gave reasons over the past many months in my Wellington Letter why the rise in yields could be shockingly significant.). Furthermore, they will say bonds will make a better alternative to stocks because higher bond yields make them more attractive than the average stock. Wall Street analysts became bearish on stocks as they had been taught for years that higher interest rates are automatically bad for stocks. Example: For prolific bull market in modern American history started at the end of stagflation era in 1982 and ended in 2000 during dotcom burst that the bull market continues to rage on. By. Treasury yields and commodity indices must be watched very closely to see if a potential huge change will continue or if this is another false start. Based on when it last hit a record, the … In 2016 it formed a double bottom and then had a strong rally. Sotheby’s. Commodity speculation became very popular as commodity prices soared from 1978 to 1980, presenting opportunities of a lifetime. The most widely watched yield is that of the 10-Year U.S. Treasury bond. Notice how every single case is from February 1999 – January 2001. As I explained earlier, U.S. Treasury bonds had a big plunge this past January. Concerns about how the White House is handling the crisis and a political impasse in Washington are fueling investor concerns. After days of wild fluctuations, the Dow has now fallen 20% from its most recent highs – finally signaling a bear market. A cheaper dollar will be one of the goals. On March 9, 2009, the day the bull market was born, the stock market, like the economy, was in deep, seemingly existential distress. However, has the inflation trend already reversed to the upside? What this means is that investors have not lost money when buying a bond because their rates of return were always positive. Experts believe the stock market is experiencing the longest bull market ever, hitting 3,453 days on August 22nd, 2018, from a low on March 9th, 2009. You will hear some other analysts being bullish on bonds, saying that bond yields will decline as bond prices rise because of money flowing out of stocks. Stocks enter the manic, exuberant bull market stage, but that doesn't mean it's near ending Published Sat, Jan 9 2021 8:45 AM EST Updated Sun, Jan … Bonds . My analysis has been featured in Forbes, the Wall Street Journal, Barron’s, Business Week, Money Magazine, Investor’s Business Daily, etc. One consequence is rising bond yields and therefore declining bond prices. “I can’t see people buying when the tornado is still in the backyard,” he said. These are very long-term signals, not something that will change next week or next month. The S&P 500 also fell and is now 19% below its recent high. Please Follow me on Twitter @BertDohmen and on LinkedIn (http://www.linkedin.com/in/bertdohmen/), © 2021 Forbes Media LLC. Many investors are worried that a divided Congress will have trouble agreeing to any plan, said Kristina Hooper, Invesco’s chief global market strategist. The S&P 500 briefly dipped into bear market territory Wednesday during another ferocious day of selling. According to InvesTech Research, the median duration of a modern bull market is 3.6 years, so we are already in an aging bull market. Note the very volatile uptrend in the chart. Stock prices can go up a whole lot more before we finally get there. This is very important market history. The S&P 500 has had seven bull markets since 1970, five of them resulted in a market rise of over 100 percent. It is a Long term bull market trend. But my forecast that rising inflation and interest rates would cause stock prices to rise, as stocks would become inflation hedges, was greeted with the greatest skepticism as it was the exact opposite of what Wall Street was forecasting. For a perspective, I have discussed for months the similarities to 1978-1980, which we called perfectly at the outset of our new research business. It had been a 16 year secular bear market until closing above those highs, and stocks never looked back. The huge three-year rise in yields was followed by an amazing 36-year decline in bond yields. Now, a bull market that nobody saw coming has ended the same way it began -- amid panic, and with little warning. My warnings were very timely. I am the President of Dohmen Capital Research, which has been providing market timing for traders and investors world-wide for over 40 years. And it will end at the hands of this monstrous debt load. Opinions expressed by Forbes Contributors are their own. In the current bull market, the low point … In other words, inflation was the silent tax on individuals. All Rights Reserved. But it happened! Trump said: “Prior to the coronavirus it was all go. The fall came as Donald Trump met with Wall Street’s most senior executives at the White House. Mark Zandi, chief economist at Moody’s, predicted more sell-offs. The terms bull and bear market are used to describe how stock markets are performing. What happened over the next two years? In 2007, I predicted the coming crisis in my book, “Prelude To Meltdown.” I have been on national TV, such as CNBC, Neil Cavuto on FOX, Moneyline with Lou Dobbs, and others. But the bull market would end in an instant as the Dow crashed an astonishing 22.6% on October 19, 1987, a day now known as Black Monday. Did this bull market end in January? Stock market valuations. In the next Wellington Letter we will discuss the one critical thing that makes the current situation even more critical than 1978-1980 and how it may differ from that period. This followed the United States bull market of 2002–07 and was followed by the United States bull market of 2009–2020 The DJIA, a price-weighted average (adjusted for splits and dividends) of 30 large companies on the New York Stock Exchange, peaked on October 9, 2007 with a … But of course, almost anything is possible in today’s world, except that pigs will fly. 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