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Notes for Investors: What Markets Indicated This Week

  • 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. 
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