- The bond market created fear this week when interest rates on the 10-Year Treasury Bond unexpectedly dropped.
- The bond market has historically been a fairly accurate predictor of where the stock market is headed. When bond rates decrease, it’s often a sign of recessionary times ahead.
- I believe investors were frightened by the bond market’s activity, and this caused a sell-off in the market.
- But is the bond market telling us we're headed toward Bear Market conditions?
- No, I think this all boils down to the ongoing unemployment issue—specifically, the labor participation rate.
- Jobs are there, but they aren't being filled because many unemployed people don’t seem ready to go back to work yet.
- When companies don't have an adequate labor supply, they typically do not make as much profit. Lower profits translate to lower stock prices—hence the sell-off scare we saw this week.
- While the recovery is not happening as fast as investors would like, I still think it’s happening and that it could end up being a massive recovery.
- So, despite some unexpected events and things not going as quickly as we’d all like to see, I still think we'll see all-time highs going into the end of the year.
- But I do feel that there could be dark clouds ahead into next year with the debt we're incurring and inflation on the horizon. But for right now, I see no reason to change my investment portfolio, which is 50 percent energy and blue chip, 40 percent bonds and 10 percent real estate.
Saturday, July 10, 2021
Notes for Investors: What Markets Indicated This Week
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