Forgot the rubbish that is Stocks, focus on the beauty that are bonds
The Global Financial Market: Bonds and Equities Looking at the bigger picture it has been an extraordinary year. It has been full of uncertainties. They have however mellowed off and become less of a concern. We have had an extremely strong stock market. More importantly a very strong bond market. New highs in equity markets. Bill Blain, Strategist for Mint Partners tells us that "everyone who is sceptical remembers that the market can be irrational longer than you can be solvent".
Moving on we look at the global central banks who are moving on a different path than the rest of the market. 15 Trillion dollars have been pumped in to the markets through quantitative easing. The affect of QE has driven financial asset prices higher. Global stocks are around 100% of global GDP. Not a panic level yet. The only objective the market has is to inflict the maximum amount of pain on the maximum amount of participants. Moreover Bill tells us that global bonds markets are where we should be looking. In the light of the fact that the US Treasury 10 Year Bond is the most important number in the world. Currently the yield is around 2.4%. However banks are moving in to a tightening phase. We are moving in to a new era.
Another key point to remember is that the bond market moves in very long cycles. It could be argued that the current cycle began in the 1950's and with the current technical set-up it looks as if this cycle has finally reached its end. This does mean that interest rates will start to rise. With this in mind, it means the return of inflation. This could cause a correction in the stock market. A valuation shock is the key to this. When UK interest rates are at 0.25% that sends a clear signal that it is not worth investing as the returns are too low. Once you raise rates you drive entrepreneurial spirits to invest again.
Further Information
Why not check out more from Bill Blain on Core Finance by using this link: http://www.corelondon.tv/?s=bill+blain
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