Everyone is looking for the holy grail of the financial market which will
tell what will happen next in stocks, commodities, bonds etc... Knowing that
the holy grail of trading does not exist I am going to step out on a limb and
share my four month stock market forecast along with commodities and bonds.
It is vital that you understand this is a 2-4 month forecast only and as the
market evolves my outlook will change as I follow price action as closely as
possible.
Here are some key points you need to know:
-
Bonds should perform well for a few months and possibly a long time until
the bear market in US stocks takes hold and is well under way. BUT, the
bond bubble will burst eventually when rates start to climb. This could
be June, or much later in the year but until then I expect them to rise
as the safe haven.
-
Commodities typically outperform equities during the late staged of the
bull market which is what I feel the US stock market is. Resource stocks
and resource rich countries like Canada should hold up well, and possibly
make new highs going into summer.
-
Notice how gold and oil have moved from opposite corners of the chart
compared to the US and Canadian stock indexes.
-
During the 2000 and 2008 bear market we saw gold, silver, oil and mining
stocks get hit very hard in the second half of the bear market. Will this
happen again? I do not think it will because this time rates are at zero
and there is only one way to go when they are at the bottom... Up!. This
means stocks and bonds will likely both enter a bear market, maybe not
at the same time, but they will eventually. This means the only places
to protect your capital will be commodities, resource based investments,
or simply cash CAD & USD.
Take a look at this 10 year bond price overlaid on the S&P 500 index.
So far this year bonds have popped and rallied above short term resistance
which we have seen in the past. Big money is rotating into bonds for the time
being and this is a warning sign of a stock market top.
Market Forecast Conclusion:
In short, safe havens for investor's capital will be more of a dance during
the next bear market in US equities.
With many countries devaluing their currencies and a potential bull market
in commodities I expect the Canadian Loonie and US Green Back to hold the value
if not rise over the next year or two.
