A seismic shift is underway in the markets. And smart investors are already taking steps to profit from it.
The U.S. central bank, the Federal Reserve or "the Fed" is the single most powerful financial entity in the world. What the Fed wants... the Fed gets. And the Fed wants to make money cheaper.
To whit, the Fed has just introduced an aggressive easing cycle at a time while the U.S. economy is still growing. Consider that the last time the Fed cut rates by 0.5% to kick off an easing cycle, the economy was in recession. This time around the economy is already growing at an annualized rate of 3+%!
So right off the bat, we have the most powerful entity in the world, Fed, which is the central bank for the largest economy in the world (the U.S.), which prints the reserve currency of the world (the $USD) making money cheaper.
On top of this, financial authorities in China, which is the 2nd largest economy in the world, are now actively funneling liquidity/ stimulus into its financial system. Chinese stocks have just EXPLODED higher, breaking out of a three year downtrend.
As a result of these two powerful entities (the Fed and China's financial authorities) easing monetary conditions, the global ratio between stocks and bonds have just broken out of a bull flag formation to the upside.
See for yourself.
Below is a chart of the entirety of the global stock market plotted against the entirety of the global bond market. When stocks outperform bonds, this chart rises. When stocks underperform bonds, this chart falls. And right now, this chart is breaking out of a four month bull flag formation to the upside.
Regardless of what anyone else tells you, investors should prefer stocks to bonds right now. We remain in a risk on environment regardless of pullbacks.
To avoid making the mistake of panicking during a garden variety pullback, I’d refer you to our special investment report, How to Predict a Crash which details a quantifiable tool that has accurately predicted Black Swan market crashes. It caught the 1987 Crash, the Tech Crash, and the Great Financial Crisis, to name a few.
With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in How to Predict a Crash.
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Best Regards
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
