After a rough couple of weeks in the equity markets, it was easy to forget that we recently reached new highs in the S&P 500 and the chance for a major correction remained low. Nevertheless, novice investors got spooked due to the “inverted yield-curve” news and heightened geopolitical drama. Due to even low lower interest rates now, there are fewer places to put your money. U.S. stocks, although over-valued fundamentally, remain the most reasonable place to store money and preserve purchasing power.
The world now has $17 trillion of negative-yielding debt. Germany has issued a -0.11% 30-year government bond and the Swiss Central Bank charges 0.75% to store your money there. Demand for negative debt seems to be growing at an accelerated rate, setting the stage in which banks will charge you to have a savings account. If recent history is any guide, the current rate environment has been the single most influential impactor on current markets.
iShares 20+ Year Treasury ETF illustrates the recent rise in prices as rates dropped, reflecting their inverse relationship. A short-term reversal is anticipated, however, it's wise to assume that negative interest rates are the new normal.
SPIDER SP500 ETF illustrates one of the most stable collections of stocks in the marketplace, reminding us that U.S. conglomerates remain the most attractive store of value for global investors. This outperforms other indexes, including commodities and emerging market stocks. U.S. large stocks remain in a strong up-trend.
iShares Emerging Markets ETF shows its burden by holding China as a major holding. It appears to reach some resistance, however, there's limited expected upside as long as the same headwinds remain.
At Eureka Wealth Management, I use technical analysis to keep my clients informed of the latest market trends so that they can make smart investing decisions. I also analyze retirement, insurance and advise on tax & estate strategies. Call for a free, initial consultation at (760) 537-0791 or book a meeting online at eurekawealthmanagement.com.