HERE’s How The Stock Bubble Ends…
If you’ve been around the investment world for long, you know that expensive asset prices, by themselves, don’t end bull markets.
Many assets sell for high valuations for years on end, before flattening out or eventually declining.
Examples of this phenomenon are scattered throughout the world, so don’t expect the fact that stocks are trading at all-time highs to put a stop to the 10-yr bull market.
Nor should you believe that the upside potential from here is miniscule, since stocks can still gain 30%-50% from here; some even say 60%-70%, before finally peaking.
No, the reason rallies end has to do with ALTERNATIVE investments, or what we call relative valuations.
Take a look:
Currently, the 10-yr yield just broke out above its 2014 level of 3.2%, well below the 5% level. Yields would have to rise by another 56% to get to that level, but what is very interesting is that the 10 year forecast for the S&P 500 performance is also around 5% annually, so we’re entering an environment, where stocks are expected to make lower returns than before, while bonds are expected to yield less than their historical averages as well.
Both stocks and bonds, then, are projected to underperform their average long-term returns.
Given a choice between earning 5% in riskier stocks, or 4% on risk-free bonds, it looks like investors will start moving funds into bonds, but they will be disappointed with their results.
In times when both bonds and stocks offer little to the investment community, investors turn to deep-value assets, which are trading well below their historical values, with the purpose of “riding” the reversion to the mean.
As you can see, for a very long time, stocks have had better earnings spreads than bonds yields, but this ratio is tilting over.
I’m telling you that we are about to see a major shift in the risk/reward ratios, offered by both stocks and bonds, which will make commodities look very attractive, compared to both.
My money is on precious metals, industrial metals, and agricultural commodities.
Slowly, but surely, I’m beginning to make some strategic allocations, but not being aggressive yet.
There’s still time, but, mark my words, commodities are the next big market-mover because they are the best ALTERNATIVE.
Best Regards,
Brad Robbins
President, PureBlockchainWealth.com
Legal Notice:
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Original Article Available HERE