The Dow Jones Industrial Average sold off almost 2,000 points in just a few days recently. The Dow now trades at the same level as it did back in January 2018.
Bonds meanwhile continue their move higher in price (lower in yield) as unlike stocks, their corrective move had added momentum. When it comes to bonds, we hear statements like highest prices (or lowest yields) since 2016. That’s because the current bond market rally is a correction of the downward price trend in bonds that dates back to 2016 (for me 2012).
Last month’s letter discussed how I expected asset prices of bonds, stocks and gold to soon complete. We have seen the initial move down for stocks and I look for similar strong downward moves to begin in bonds and gold at any time.
“At any time” is the operative word. Last month’s market focus was based on the movements of the asset markets over the past weeks as well as the past several years. Markets behave like markets, despite the actions of central bankers or presidents, war or peace. So last month’s giddy didn’t indicate a continuation of trend, but rather the end of a move.
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