Wal-Mart (WMT) is the largest private employer in the world. It’s also one of the largest retailers in the world. As such, it is a major economic bellwether.
The Waltons are the family that founded Wal-Mart (WMT). They remain the largest owners of its stock. And they have been dumping BILLIONS of dollars in WMT stock in the last few months.
What do they know that we don’t?
Apple (AAPL) is the largest company on the S&P 500. It is also the largest consumer discretionary company in the world. AAPL insiders including the CEO, COO and General Counsel have sold $41 million worth of stock recently.
The last time the CEO sold was in 2018. AAPL shares fell 41% that year. He’s selling again now.
What does he know that we don’t?
And finally… my proprietary Crash Trigger is now on the first confirmed “Sell” signal in over a decade.
The last time this signal hit?
2008.
What does it know that we don’t?
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The bond market is signaling some thing “BAD” is coming.
Bond yields rose throughout late 2021-early 2023 on fears of inflation. But once Silicon Valley Bank imploded, yields dropped rapidly: historically investors pile into Treasuries as a “safety trade” whenever things get hairy in the financial system. The regional banking crisis in mid-March was no exception with yields collapsing at their fastest rate since the 1987 crash.
When this happened, I began to wonder… would yields begin to rise again as things normalized following the regional banking bailouts… or would the economy roll over and yields finally start to plunge as a recession took hold?
We now have our answer…
The yield on the 2-Year U.S. Treasury is NOT rising anymore. If anything it’s rolling over and approaching the “Silicon Valley Bank” lows.
This is a signal that something “BAD” is brewing in the economy/ financial system. If everything was fine, yields would be rising again based on hopes of growth and fears of inflation.
Put simply, the fact yields are falling like this tells us that the bond market fears something far worse than inflation is coming…
Indeed, the 2s10s are now beginning to invert. Historically, this has been the signal that a recession is about to hit.
What happens to stocks when a recession hits while inflation is still at 6%?
The 70s showed us…
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Investors are running a repeat of the same trading pattern we saw in 2008.
That pattern?
A mini-crisis in March, followed by a summer rally, and then the real fireworks begin.
In 2008, Bear Stearns had to be absorbed in a shotgun wedding to JP Morgan on March 16th. That marked a temporary low, as investors believed the Fed easing/ backstopping the issue resolved things despite the clear evidence that the economy was rolling over.
The stock market then rallied for two months before the crisis began in earnest.
Today in 2023, the same pattern is playing out.
Once again, there was a mini-crisis in March with Silicon Valley Bank/ Signature Bank playing the part of Bear Stearns. The Fed / Treasury stepped in, backstopping the troubled banks and facilitating a deal to have them absorbed by other players.
Investors are taking this to signal the “all clear” and are piling back into stocks, kicking off a rally… once again despite the clear evidence the economy is rolling over.
As if this wasn’t spooky enough, consider that in the BIG PICTURE my proprietary Crash Trigger is now on the first confirmed “Sell” signal in over a decade.
The last time this signal hit?
2008.
See for yourself…
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Bitcoin… the ultimate liquidity play, has a rounded top. It is just clinging to support. Below that is nothing but air pockets down to 24,000 it not 19,000.
Short term Treasury bonds and high beta growth company Nvidia (NVDA). This entire move higher in high growth tech has been driven by rates. That is now ending…
Historically a recession hits when a yield curve inversion goes back to positive. We’re well on our way to that as I write this.
Seeing multiple set ups suggesting the same thing (a risk off move is coming) adds to the probability. And from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
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Stocks are now in a strange time in which they do not perceive any major threats.
As a result of this, the bulls are buying stocks based on the usual “the Fed is about to pivot” nonsense. And they’re in for a world of pain.
Last year (2022) the big threat was inflation. Inflation, combined with the Fed tightening monetary policy, forced Treasury yields higher. With yields hitting 4% or higher in some cases, stocks were no longer as attractive as an investment class. So the stock market was repriced downwards from 20-22 times forward earnings to 16-18 times forward earnings.
However, as the above chart shows, since October 2022, Treasury yields have stabilized. With yields no longer rising, the threat of inflation has “disappeared” as far as stocks are concerned. And so investors have begun pouring back into the stock market based on the hope that the Fed will soon end its monetary tightening.
This is horribly misguided. Few things destroy an investor’s portfolio like buying stocks during a recession based on hope that the Fed will start easing monetary policy. And rest assured, the same bond market that told us inflation was out of control, is now telling us that a recession has arrived.
So what happens to stock bulls who buy stocks going into a recession? Well, the last two times, stocks did this:
In simple terms, the markets are setting up to deal out a load of pain to stock market bulls in the coming weeks.
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The data is finally beginning to register that a recession is at hand.
I’ve been forecasting that the U.S. economy was in recession back in November. Leading indicators and the bond market made this clear.
The yield curve has accurately predicted every recession since 1982. And it was SCREAMING that a recession was about to hit in the U.S. since mid-2022. As you can see in the chart below, the yield curve was more inverted than at any point in the last 40 years.
However, a big problem with economic forecasting is that most data sets are backwards looking. So often times you don’t get actual data telling you that a recession has arrived until the economy is already several months into the recession.
And the stock market pays attention to economic data, NOT leading indicators.
I mention all of this because the recession that I’ve seen unfolding since November is finally showing up in the economic data. Yesterday, the Commerce Department released a number of data series that were HIGHLY recessionary.
Retail Sales clocked in at -1.1% Month over Month. Similarly, Industrial Production came in at -0.7% Month Over Month while Manufacturing Production registered -1.3% Month Over Month.
Bear in mind, these are the data points for December. So, this is what was happening in the economy a month ago. And bear in mind, the Month Over Month numbers are a comparison between December and November. So, the downturn actually started more than seven weeks ago.
This is why stocks took it on the chin and bonds caught a bid yesterday. And judging by yesterday’s data, this process is just getting started.
And remember what happened to stocks during the last two major recessions in 2000 and 2007.
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The big news this week is that stocks lost their 200-Day Moving Average (DMA) again.
Historically, November and December are two of the most bullish months for stocks. Only April is better from a single month perspective. So, the fact the market was unable to reclaim its 200-DMA and remain there is EXTREMELY bearish.
The price action was feeble to say the least.
The bulls have everything going for them: the Fed has reduced the pace of its interest rate hikes, the economy is not yet in recession, and we are in one of the best months for stock market returns: the famed Santa Rally of December.
So the fact that the bulls were unable to get stocks above their 200-DMA indicates that this recent market rally was nothing more than a Bear Market Rally, NOT the start of a new Bull Market.
Below is a chart of what happened to stocks when they failed to maintain their 200-DMA during the Bear Market of 2000-2003. I’ve highlighted this in red circles. Stocks dropped another 30%.
Here’s the same item during the bear market of 2007-2009. This time around stocks lost 50%.
Unfortunately for anyone who is buying into this narrative that stocks are in a new bull market, the bear market is NOT over. With a recession just around the corner, stocks will soon collapse to new lows.
If you’ve yet to take steps to prepare for this, we just published a new exclusive special report How to Invest During This Bear Market.Paragraph
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The Fed will end its two-day Federal Open Market Committee (FOMC) meeting today at 2PM East Standard Time.
The known universe expects the Fed to raise rates by 0.5%. And the current consensus is that by this time next year, inflation will be down near 2%.
It’d be hilarious if it didn’t involve so much suffering.
To understand what I mean by this, let’s wind the clocks back a year to the Fed’s December 15th 2021, FOMC meeting. At that time, the Fed had only just decided that inflation was NOT “transitory.”
Bear in mind, inflation has measured by the Consumer Price Index (CPI) had cleared 5% in June of 2021. It had since increased to over 7% as of December 2021.
Despite this, the Fed had yet to raise rates or end its Quantitative Easing (QE) program: the Fed Funds Rate was at 0.25% and QE was around $105 billion per month.
Again, inflation was over 7%, the Fed Funds rate was 0.25% and QE was still over $100 billion per month. So, what did the Fed, with its army of economics PhDs and analysts predict would happen once the Fed started tightening monetary conditions in 2022?
The Fed’s official forecast for 2022 was that rates would be somewhere between 0.5% and 1%.
That is correct. With inflation over 7% and rates at 0.25% in December 2021, Fed officials predicted that one year later rates would be somewhere around 0.5%-1%. In fact, even the most HAWKISH Fed officials only saw rates around 1.25% in December 2022.
Don’t believe me? Here’s the dot plot from the December 2021 meeting.
Fast forward to today… and rates are at 4.5%. The Fed was not even in the ballpark.
But wait… it gets better.
Back in December 2021, the Fed also predicted where inflation, as measured by the Personal Consumption Expenditures (PCE) index would be a year later.
That prediction?
That PCE would be somewhere between 1.9% and 3% in 2022. In fact, the absolute worst case scenario Fed officials forecast for inflation in 2022 was 3.1%-3.2%.
See for yourself.
Fast forward to today and Personal Consumption Expenditures (PCE) inflation is 6%… or roughly DOUBLE the Fed’s WORST prediction.
I bring all of this up because the current consensus is that inflation has peaked, the Fed won’t need to be much more aggressive going forward, and that this time next year, inflation will have fallen back to the Fed’s target of 2%.
Good luck with that!
Unfortunately for anyone who is buying into this narrative today, the bear market is NOT over. With a recession just around the corner, stocks will soon collapse to new lows. And that’s even assuming that inflation DOES drop to 2% next year (it won’t).
If you’ve yet to take steps to prepare for this, we just published a new exclusive special report How to Invest During This Bear Market.Paragraph
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The following is an excerpt from my weekly investment advisory Private Wealth Advisory. To learn more about Private Wealth Advisory and how it can help you and your investments, Click Here!
This week I have
good news and bad news.
The good news is
that bonds are finally starting to stabilize.
The bad news is
that they are doing this right as the economy collapses into a severe recession.
As I’ve outlined throughout this year, the
ENTIRE stock market collapse thus far has been due to bond yields rising.
When Treasuries were yielding 0.25%-0.4%
throughout most of 2020 and 2021, investors were willing to pay 20-22 times
forward earnings for stocks. However, once Treasury yields rose over 4% stocks
were repriced down to 16-18 times forward earnings. This makes sense. When the
“risk free” rate of return is close to zero, you’ll pay a premium for growth.
But once you can earn 4+% “risk free” suddenly stocks look a lot riskier!
Indeed, stocks were priced at 20-22 times forward earnings for most of 2020 and 2021. However, once Treasury yields began to rise in late 2021, stocks peaked in terms of multiples. They were eventually repriced down to 16-18 times earnings.
As I noted since this repricing began, the ONLY thing that would stop stocks from being repriced lower would be if bond yields stabilized. With that in mind, I want to point out that the yield on the 2-Year U.S. Treasury appears to have peaked. In fact, it now looks to be forming a kind of “Head and Shoulders” topping pattern. We only need the right shoulder to complete that pattern.
Regardless of
whether that Head and Shoulders pattern is actually confirmed, the key item
here is that Treasury yields finally appear to be
stabilizing. Obviously, stocks would LOVE for Treasury yields to fall,
as that would open the door to a higher forward multiple (assuming the economy
is strong). But for now, the price action in the Treasury market suggests that
stocks will remain priced at a forward multiple of 16-18 at least for now.
That is the good
news.
The bad news is
that earnings are now collapsing, as the economy collapses into a severe
recession. This means the denominator in the P/E ratio (Price/ Earnings) is now
shrinking. Earnings for the third quarter of 2022 are DOWN 8% Year over Year.
As Charlie Bilello notes, this is the second consecutive quarter of
negative earnings growth on a Year over Year basis.
Unfortunately, earnings will be dropping even more going forward. To understand why, we need to first understand the Treasury market. The Treasury is comprised of numerous bonds with different maturation periods ranging from 4 weeks to 30 years.
When you plot the
yield on all of these bonds, you get the “yield curve.” And the
difference in yield between various bonds on this curve is one of the most
accurate predictors of recession.
Specifically, the
difference between the yield on the 10-Year U.S. Treasury and the yield on the
3-month U.S. Treasury. Anytime this difference becomes negative (meaning the
3-month yield is actually higher than the 10-year yield) this indicates a
recession is about to hit.
I’ve illustrated
this in the chart below. Anytime the
black line falls below the red line, the 10-year 3-month yield curve is
“inverted.” This was the case in 1989, 2001, 2007, and 2019: all of those
preceded recessions.
It is happening again now. And as you can see, this metric is MORE negative today than it was before the COVID-19 crash as well as the Great Financial Crisis.
Put simply, the
yield curve of the Treasury market is predicting a severe recession in
the near future, likely the start of 2023.
This is going to
force stocks to new lows.
During the typical recession, Earnings Per Share
(EPS) usually fall 25%. As I write this, Wall Street’s current consensus for
2023 EPS is $230. And Wall Street expects this to GROW by 5%!!!
This means the anticipated fair value for the S&P 500 is somewhere between 3,680 and 4,140. Incidentally, that is the EXACT trading range the S&P 500 has been moving in for the last six months.
Put simply, the market is trading based on what Wall Street
expects is coming down the pike. But as I just noted, Wall Street expects
earnings growth of 5% next year. However, the reality is that bonds are telling
us a recession is coming… and a recession would mean a DECLINE in
earnings of at least 25% (remember, the yield curve is predicting a
SEVERE recession).
This would mean the actual 2023 EPS would be closer to $172.
Assuming Treasury yields no longer rise, this means the fair
value for the S&P 500 at 16 to 18 times this much lower EPS would be
2,752-3,096. I’ve illustrated that range in the chart below. Suffice to say,
the stock market has a LONG ways to go to the downside.
“But wait a minute, Graham” some of you are probably
thinking… “the Fed is about to pivot sometime next year, and that would STOP
the bear market!”
I wish that was
the case…
Historically, anytime the Fed stops
tightening and begins easing, the markets don’t actually bottom for
another 14 months.
During the Tech Crash, the Fed started cutting rates in January of 2001. However, by that point, a recession had hit and stocks lost another 44% eventually bottoming in October 2003.
Similarly, during the Housing Crash, the
Fed started easing in August of 2007. There again, a recession hit and stocks lost
another 56% before eventually bottoming in March 2009.
Simply put, even
if the Fed were to surprise everyone and start easing as soon as next month (December) the coming recession
would STILL result in EPS collapsing and stocks cratering another 30% or so.
With stocks at
4,000 or so on the S&P 500, a 30% decline would bring them right to… 2,800,
or around the lower end of the implied fair value for the market at a 16- times
my expected EPS for 2023: $172.
Low Multiple Recessionary EPS Fair Value in 2023
16 X $172 = 2,752
or ~2.800
So again, this
week we have both good news and bad news. The good news is that bonds are
stabilizing. The bad news is that a recession is coming, and earnings are about
to crater.
That will trigger
a stock market collapse to new lows… possibly down to the mid-2000s on the
S&P 500.
If you’ve yet to take steps
to prepare for this, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment
to own during the bear market as well as how to invest to potentially
generate life changing wealth when
it ends.
Over the last few days, I’ve illustrated how several major indicators are flashing “RECESSION!”
By quick way of review:
The 10y-3m yield curve has predicted every recession in the last 50 years. It’s telling us that a new severe recession is just around the corner.
Oil has collapsed from $130 per barrel to ~$75 per barrel, indicating demand destruction is underway.
All of this is BAD news for stocks.
Why?
During the typical recession Earnings Per Share (EPS) decline by 25%.
Based on what bonds are doing, stocks are priced between 16 and 18 times forward EPS. Wall Street is currently forecasting EPS growth of 5% next year to $230.
$230 X 16 (or 18)= 3,680 to 4,410.
Incidentally, that is the trading range that stocks have been in for most of the last six months.
By Graham Summers, MBA
Over the last few days, I’ve illustrated how several major indicators are flashing “RECESSION!”
By quick way of review:
The 10y-3m yield curve has predicted every recession in the last 50 years. It’s telling us that a new, severe recession is just around the corner.
Oil has collapsed from $130 per barrel to ~$75 per barrel, indicating demand destruction is underway. This only happens during a recession.
All of these data points are BAD news for stocks.
Why?
During the typical recession Earnings Per Share (EPS) decline by 25%.
Based on what bonds are doing, stocks are priced between 16 and 18 times forward EPS. And Wall Street is currently forecasting EPS growth of 5% next year to $230.
$230 X 16 (or 18)= 3,680 to 4,410.
Incidentally, that is the trading range that stocks have been in for most of the last six months.
However, a recession would mean that EPS for 2023 is closer to $172.
$172 X 16 (or 18)= 2,752 to 3,096
That’s the red box in the chart below.
Put simply, a recession will erase trillions of dollars in wealth…and Wall Street is once again asleep at the wheel, driving its clients off a cliff.
You don’t need to be one of them!
If you’ve yet to take
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it ends.
As I noted yesterday, the bond market is telling us that a recession is just around the corner.
By quick way of review, the U.S. treasury market is comprised of 12 bonds, with durations ranging from four weeks to 30 years.
When you plot the yield on all of these bonds, you get the “yield curve.” And the difference in yield between the 10-Year U.S. Treasury and the 3-month U.S. Treasury is one of the best predictors of recessions in the world.
Put simply, anytime this difference becomes negative (meaning the 3-month yield is actually higher than the 10-year yield) this indicates a recession is about to hit.
It happened in 1989, 2001, 2007, and 2019 and today.
This alone is bad news, but we get additional confirmation of a recession from oil.
As you know, oil is extremely closely linked to economic growth. And oil is collapsing, having fallen from $120+ per barrel to the mid-$70s per barrel.
There is only one reason for oil to fall like this during a period of high inflation: demand destruction.
Demand destruction is when the economy rolls over and there is less demand for oil. It only happens during recessions.
And what do you think a recession will do to stocks?
It’s called a crash.
This is going to
force stocks to new lows. I’ll explain why in Friday’s article. Until then…
know this: it is highly likely that a recession is going to trigger a major
crash in stocks. It’s not a question of “if,” it’s a question of “when.”
If you’ve yet to take
steps to prepare for this, we just published a new exclusive special
report How to Invest During This Bear Market.
It details the #1
investment to own during the bear market as well as how to invest to potentially
generate life changing wealth when
it ends.
The stock market is closed tomorrow for Thanksgiving. It will also close early on Friday November 25th at 1PM. As one can imagine, most of Wall Street has already left for the holidays.
This means that trading volume will be extremely light. And that means that those few traders/funds who are active will have an easier time moving the market.
As I write this, the S&P 500 is within spitting distance of its 200-day moving average. There’s little doubt in my mind that stocks will make a run for that line sometime over the holiday.
However, that is a short-term issue. The longer-term issue is that the Treasury market is telling us a severe recession is coming.
The Treasury is comprised of numerous bonds with different maturation periods. They are:
Treasury Bill Maturation Periods:
4 Weeks
13 Weeks
26 Weeks
52 Weeks
Treasury Note Maturation Periods
2 Years
3 Years
5 Years
7 Years
10 Years
Treasury Bond Maturation Periods
20 Years
30 Years
When you plot the yield on all of these bonds, you get the “yield curve.” And the difference in yield between various bonds on this curve is one of the most accurate predictors of recession.
Specifically, the difference between the yield on the 10-Year U.S. Treasury and the yield on the 3-month U.S. Treasury. Anytime this difference becomes negative (meaning the 3-month yield is actually higher than the 10-year yield) this indicates a recession is about to hit.
I’ve illustrated this in the chart below. Anytime the black line falls below the red line, the 10-year 3-month yield curve is “inverted.” This was the case in 1989, 2001, 2007, and 2019: all of those preceded recessions.
It is happening again now. And as you can see, this metric is MORE negative today than it was before the COVID-19 crash as well as the Great Financial Crisis.
Put simply, the yield curve of the Treasury market is predicting a severe recession in the near future, likely the start of 2023.
This is going to force stocks to new lows. I’ll explain why in Friday’s article. Until then… know this: it is highly likely that a recession is going to trigger a major crash in stocks. It’s not a question of “if,” it’s a question of “when.”
If you’ve yet to take
steps to prepare for this, we just published a new exclusive special
report How to Invest During This Bear Market.
It details the #1
investment to own during the bear market as well as how to invest to potentially
generate life changing wealth when
it ends.
Ever since inflation entered the financial system is early 2021, there has been a debate as to when the higher cost of living would hit consumer spending to the point of inducing a recession.
Sure, consumers can rely on savings or credit to make ends meet in the near-term. However, if inflation remains elevated for a prolonged period, eventually it becomes too much to bear, and the consumer is forced to “tap out” and cut discretionary expenses. That’s when a recession hits.
I mention all of this because the stock market is telling us that the recession has arrived.
One of the best means of analyzing intra-market developments is ratio work. This consists of comparing the performance of one asset or stock relative to the performance of another.
For example, let’s look at the ratio between the Consumer Discretionary ETF (XLY) and the S&P 500 (SPY). During periods of consumer spending strength, this line rises. And during periods of consumer spending weakness this line falls.
Below is a chart of the ratio over the last four years. As you can see, this ratio is dropping like a stone. It is actually lower today than it was at the lows of the March 2020 Crash!
This suggests the consumer is “tapping out” right here and now. The question now is if this is just a slight downturn or the start of a major recession. To answer that, let’s step back and look at a longer-term chart.
From an economics perspective, this is the most disturbing thing I’ve seen in years. It suggests the U.S. is entering its first major recession since the Great Financial Crisis of 2007-2009.
I think we all remember what happened to stocks during that time: an extraordinary crash in which stocks lost over 50% of their value.
A crash is coming. And it’s going to make 2008 look like a joke.
If you’ve yet to take steps to prepare for this, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The Fed is now
cornered courtesy of the coming inflationary recession.
Let’s start with the
economy first.
The 2s-10s yield curve
is just a 19.4 basis points away from inversion. The last FOUR times this yield
curve inverted the U.S. experienced a recession soon after. I’ve identified
that line on the chart below:
A recession is bad
enough news because it means a bear market in stocks and most likely a crash.
Here’s that same chart with the S&P 500 below it. Note what happened to
stocks soon after the yield curve inversion hit (note that the 1990 market saw
a 17% drop, but the chart doesn’t show it well).
On top of this, inflation is roaring in the financial system. Gasoline is up 80% in the last 12 months. Lumber is up 36%. Copper is up 15%. And wheat has exploded 90% higher!
Remember, the consumer accounts for 75% of GDP in the U.S. What do you think happens to consumer spending when inflation eats into incomes? There is a reason Presidential ratings are highly correlated to gasoline prices!
And all of this is happening when the Fed only just ended QE and still has rates at zero.
Yes, we are
rapidly heading into an inflationary recession, and the Fed hasn’t even begun tightening
yet. If the Fed tightens to rapidly to kill inflation, the economy collapses. And
if the Fed takes its time raising rates, inflation rages, and the economy again
collapses.
The Fed is officially
cornered. There is no possible way to navigate this mess without disaster. Remember
the last four recessions involved a stock market crash. This one will likely
prove no different.
For those looking to
prepare and profit from this mess, our Stock Market Crash Survival
Guide can show you how.
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By now, you’re no
doubt getting pretty worried about the markets.
After all, why
wouldn’t you?
Russia has invaded
Ukraine which has massive implications for natural resources. Oil is over $120 a
barrel. The stock market is already down over 10% from its recent highs.
It’s enough to stress anyone out!
Well, unfortunately we now need to add the following: the U.S. will likely enter a recession late this year or early in the next.
According to the
Fed’s research, the most accurate predictor of a recession is the 10-year/ 3 month
U.S Treasury yield curve, or the difference between the yield on the 10-Year
U.S. Treasury and the yield on the 3-month U.S. Treasury.
Whenever this
yield curve breaks below 0%, the U.S. has entered a recession. I’ve identified
this level on the chart below.
The bad news today is that this yield curve is currently rolling over in a big way.
As I write this, it’s about to take out its upward trendline (red line in the chart below). This would mean that the yield curve is no longer trending in a positive manner but is heading downwards to the dreaded ZERO that predicts a recession.
Put another way, a break of this level would almost assuredly trigger a yield curve inversion… which would mean a recession is just around the corner.
Please note, the last two recessions triggered stock market crashes. The yield curve inverted a mere six to nine months before the crash hit. This means we can expect a full blown crash some time later this year or early in the next
You’ve been warned.
For those looking to prepare
and profit from this mess, our Stock Market Crash Survival
Guide can show you how.
Within
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meltdown as well as how to take out “Crash insurance” on your portfolio (these
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The bond market is telling us, that the markets… and the economy… are both in very serious trouble.
The difference between the yield on the 3-month Treasury and the 10-year Treasury (called the yield curve) is inverted.
What this means is that yield on the 10-Year Treasury is LOWER than the yield on the 3-month Treasury… this ONLY happens when investors get panicked about the near-term… and flock to long-term Treasuries as a safe haven.
What could happen to trigger such an event?
Well, the last time the yield curve hit these levels at the end of a business cycle was in late 2006… right as the housing market rolled over… and the US began its move into the worst recession in decades.
Indeed, an inverted yield curve is almost always a warning that the economy is moving into a recession.
The stock market is usually quick to follow. The last two times the yield curve inverted like this were March 2000… right when the Tech Bubble burst… and late 2006… right as the housing bubble burst… and about 12 months before the Great Financial Crisis…
Put in simple terms, the bond market is telling us: a Crash is coming… either right now… or in the near future…
On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.
In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.
The Fed has now created the single most dangerous stock market environment possible…
That’s when the economy is slowing… and stocks are RALLYING based on hopes that the Fed will soon introduce more monetary easing.
This is precisely what happened in 2008. And it’s when CRASHES happen.
And that’s when the opportunity for truly MASSIVE returns appears.
Take a look at the below chart. This is a chart of the S&P 500 stock market against the yield on the 10-Year US Treasury. And remember, bonds, particularly Treasury bonds, are considered the SMART money for a reason.
The S&P 500 is trading as though the US is about to enter an economic NIRVANA. The Treasury yield is trading as though the Trump economic boom is OVER: the yield has broken its bull market trendline from mid-2016 (blue line). It’s also broken below critical support (red line).
You can ignore bonds all you like, but they are almost always correct. They were right in 2000… and in 2008. What are the odds they’re wrong now?
Which means…
A Crash is coming… and 99% of investors will panic when it hits…
On that note, we are putting together an Executive Summary outlining all of these issues as well as what’s coming down the pike when the Everything Bubble bursts.
It will be available exclusively to our clients. If you’d like to have a copy delivered to your inbox when it’s completed, you can join the wait-list here.
