Prepare for the End of the Bond Bull Market
Why long-term rates will rise in 2018... Speculators have rarely been so bullish... Prepare for the end of the bond bull market... How to 'unlock' your portfolio for the biggest (and safest) gains this year...
Yesterday, we shared our colleague Steve Sjuggerud's latest thoughts on the stock market...
In short, despite the big gains in stocks last year... and despite the first signs of investor "giddiness" in years... Steve believes this bull market still has further to run.
But that's not the only bold prediction "
He also believes this year could bring the first significant rise in long-term interest rates in years. As Steve's senior analyst Brett Eversole explained in yesterday's edition of our free DailyWealth e-letter...
Economists have come out with their predictions for interest rates this year. They're all expecting long-term interest rates to rise. It's the same default setting they've been stuck on for decades. And guess what...
It has been wrong... for decades. They say it every year. But since the 1980s, 30-year Treasury bond yields have been on a one-way road lower.
Is this the year the economists will finally be right? Actually, yes. The last time we saw a setup like today, the yield on 30-year Treasury bonds rose more than 1% in less than six months.
As he noted, there's one major reason to expect rates to move higher this year. But it has almost nothing to do with the economic factors most folks expect...
You see, Treasury bonds – and the yields they pay – work like any other asset. When folks all expect them to move one direction, they tend to move the other way.
Today, traders are overly bullish on Treasury bond prices. And since bond prices and interest rates move in opposite directions, that means traders (unlike economists) are betting massively on lower rates right now.
Brett was referring to the latest data from the Commitments of Traders ('COT ') report...
This report is published weekly by the U.S. Commodity Futures Trading
Again, because bond prices and interest rates trade inversely, these record bets mean these traders are also betting heavily on lower long-term rates. Unfortunately, the last time this happened, it didn't work out so well for them. More from Brett...
You can see the last time optimism was near today's level was mid-2016. Traders all expected lower rates back then... But they didn't get them.
Instead, the 30-year yield rose around 1% in less than six months. It was a major move higher for rates (and lower for Treasury bond prices).
We have the same setup today.
A similar move this time around would push long-term rates to 4% or higher...
As you can see in the following chart, this would create the first uptrend of higher lows and higher highs in decades... and would likely signal an official end to the 40-year bull market in bonds...
This obviously wouldn't be great news for owners of long-term government bonds, but it could be a boon for stocks, at least in the near term.
You see, while higher interest rates will eventually lead to serious problems for our debt-driven economy, rising long-term rates should initially ease the falling yield curve we've been following.
Barring an unexpected market shock, this could delay the next recession even longer.
Our advice remains the same...
Stay long stocks... But be sure to follow good risk-management strategies like conservative position-sizing and trailing-stop losses to protect your capital. And hold some cash and gold, just in case.
If you're interested in going even further... in maximizing your potential profits over the final "inning" of this bull market, without taking on more risk... we urge you to join us for tomorrow night's special event.
Our friend and TradeStops founder Dr. Richard Smith will be sharing proprietary research that can dramatically improve your returns
For example, he'll show you how you could've easily made more than four times bigger returns in Steve's True Wealth recommendations... more than three times bigger returns in Porter's Investment Advisory recommendations... and earn even more money while taking less risk in Dr. David Eifrig's Retirement Millionaire recommendations.
Richard will also walk you through several of the highest-upside stocks from across the Stansberry Research universe today... show you how to know exactly when to buy and sell each of these stocks... and even how to know how much of each to hold in your portfolio.
This event kicks off tomorrow night, January 4, at 8 p.m. Eastern time. And as always, it is absolutely free for Stansberry Research subscribers. Simply click here to reserve your spot now.
New 52-week highs (as of 1/2/18): AbbVie (ABBV), Arch Coal (ARCH), Central Fund of Canada (CEF), Global X China Consumer Fund (CHIQ), Global X China Financials Fund (CHIX), First Trust Nasdaq Cybersecurity Fund (CIBR), Cisco (CSCO), WisdomTree Emerging Markets High Dividend Fund (DEM), Eaton Vance Enhanced Equity Income Fund (EOI), Barclays ETN+ FI Enhanced Europe 50 Fund (FEEU), iShares Transportation Average Fund (IYT), JPMorgan Chase (JPM), KraneShares E China Commercial Paper Fund (KCNY), KraneShares CSI China Internet Fund (KWEB), Match Group (MTCH), NVR (NVR), iShares Global Metals & Mining Producers Fund (PICK), Ralph Lauren (RL), ALPS Medical Breakthroughs Fund (SBIO), iShares MSCI India Small-Cap Fund (SMIN), ProShares Ultra S&P 500 Fund (SSO), Steel Dynamics (STLD), and ProShares Ultra FTSE China 50 Fund (XPP).
Apparently, the holiday drinks are still flowing. In today's mailbag, we've got praise for both Steve's bullish "
"I have to congratulate Steve on [the] marvelous call on the '
"Porter, I want to thank you for warning everyone. You have done that often over the years that I have been a member. Without those warnings keeping me grounded I probably would have been investing a lot different.
"The one thing that these newsletters have done is taught me to make sure that I have control of my investments and have them allocated such that unless everything goes down the crapper my family won't starve or be homeless.
"It isn't fun to read about reality. But without
Regards,
Justin Brill
Baltimore, Maryland
January 3, 2018