Bitcoin looks particularly oversold here with many metrics pointing big players stepping back into the asset.
Sentiment is very bearish with Fed fear peaking, these conditions are setting up crypto and equities for nice rallies over the next few months (with the possibility of retesting the lows).
Gold has had a tough time with a stronger dollar and rising yields. Although we could see a weaker dollar, rising yields will likely remain a headwind over the next few months.
However, investors who seek to have a diversified portfolio (and not look to time particular market environments) can invest in both Bitcoin and Gold (during big dips like we’ve recently seen on both assets) and hold for the foreseeable future to take advantage of a “monetary debasement” environment (with Bitcoin taking advantage of risk-on debasement and Gold taking advantage of risk-off debasement).
@ GOT What your expectations on USD? Are you still expecting a drop, wharts the forces behons and can you maybe in a video elaborate over the moves above 97? Are your thesis still valid on need to be adjusted sligthly? Incl gold and emerging markeds. Thanks
This is the first time I have heard about the PIE ratio. Thank you for enlightening me. So then based on this, do you suggest gold / silver / Bitcoin? What about real-estate considering current PIE ratio conditions?
I think you might have made a mistake in how you compared the Price/Integrated Equity chart returns with the Asset Allocation chart returns. The former is for the full forward 10 year return (you said annualized), the latter is based on annualized return. Otherwise this would make no sense as one has -10% and the other has -2% as the forward returns, so they have to be for different time scales.
Would the numbers make sense if the P/IE chart was annualized return, inflation adjusted? It is at about -8 to -9%, and that would line up with the asset allocation chart (not inflation adjusted) at about -2 to -3% if inflation were about 6%.
Losing 9% of purchasing power for 10 years would leave you with about 39%. This would be almost as bad as the 70s.
I just wonder if dividends are left out of these charts. It certainly is for the SPX chart. I think it is also for the P/IE and asset allocation charts.
In 1972 my favorite candy bar was a Three Musketeers Bar it was about six inches long and I could buy one with my paper route money for 5 cents. By the time I started working on the farm in 1978 it was half the size and a dime. My vivid recollection of monitoring debasement.
I feel like this chart would counter that argument. Puts a bullish case for the next 10 years… thoughts? Not sure if it’s different now as it was plucked together in 2019….
Will be looking at other data sources on rolling returns.
The chart you’ve shown seems to have distorted numbers.
In 1984, 10-year stock market returns had been extremely poor and no where close to what the chart suggests.
I think the chart provided is correct. Here is another source: https://www.crestmontresearch.com/docs/Stock-Rolling-Components.pdf HOWEVER – if the time horizon for investments are 20-30 years compared to making money consistently in every market regime it is quite bad to stay 100% invested into S&P500. If the market regime is going into STAGNATION and later DEFLATION this year then reduce your allocation to S&P 500 now when (and if the rally continues for the next month) and then buy back in at much more favorable prices and hold for many more years to come. Peter – I wish you provided clearer insights into what market regime we are going to in the next couple of months and adjust your advice to that in combination with the chart analysis you are providing. I know you have been quite bearish on US Longer Nominal Bonds (+20 year like TLT EDV ZROZ). Those and my dollar positions I was building up during the bearishness at the market top since my assessment is that we are heading into stagflation – check out econpi.com – that’s great site for economic growth and credit analysis to understand where we are heading. Our US economy is clearly declining above the baseline. When we are contracting below the baseline in a few months then watch out. No longer am I bear on longer term US Bonds and US Dollar compared to other currencies. Stagflation first then Deflationary Bust then many many years of GOLDILOCKS like Brad Hill suggests in the 10 year average rolling returns (which I agree with 100%).
@ Brad HIll: I don’t think this is a contradiction because it is trailing 10 year total returns and the asset allocation chart predicts forward 10 year price returns.
@GOT: the trailing 10 year price returns in 1984 were roughly 5%. What were dividends then? Weren’t they about 5% too? That would make the trailing 10y TR chart that Brad posted correct.
I see what you’re saying. The way I read it was from 2018 to 2036 the rolling 10 year average should be higher than the 10% historical average before inflation. That’s the 18 year period they’re talking about. Maybe when inflation is factored in we get the picture Peter is seeing. I think historically the average after inflation was 6% to 8%. If inflation is worse than historical or the pattern doesn’t hold…
Your reading is correct.
The chart is accurate.
Sorry, I was sloppy because I didn’t want to be too long.
1) I don’t see a good reason why the sine wave in the diagram should continue. Two instances is hard to draw a strong conclusion of a repeating pattern. It’s predictive power is more like the DOW/Gold chart. There is really nothing to prevent the chart from doing whatever.
2) If the bars are decreasing, even if above 10%, you are likely losing money in the moment.
3) The asset allocation chart has a long history of accurately describing the next to year’s returns. It has been making very specific predictions that have mostly come true. There is also a causation in the correlation as when asset allocation is high, there is likely to be selling, and then stock asset allocation is low, there is a lot of dry powder.
Cheers.
I think it’s correct if you look at it with dividends reinvested. It’s not adjusted for inflation though. I just hadn’t heard this rolling average over an 18 year cycle theory before. It looks like we crossed the line in 2018 and should have better than expected return through 2036 (over a 10 window, which is a longer period than I’m looking at other than 401k). I’m more looking to beat this over the 1-3 year, hence why I’m here. Just thought it was an interesting datapoint that contradicts a sustained long term recession in the future. Not that I means it’s impossible. Lots has changed since 1937 lol. Looking forward to see the other charts you pull.
I agree the charts are correct. But investing in the stock market 10 years after the inevitable stock market crash and great financial reset is too risky for me. I day trade, swing trade and invest, but will probably mostly swing trade once that time comes. And yes I do think a reset is coming. Just follow what is going on in domestic politics, geo-politics, and the global financial systems. It is right in front of our eyes.
You are correct Brad. Please see my comment to Peter. Good luck navigating these challenging markets. If you are shorter term investor (speculator) and want to say invested in alignment with the market regime we are heading into I can recommend taking a look every saturday on https://econpi.com
Brad’s chart does NOT predict good returns over the next ten years. We’ve been on such a good run that trailing 10 year returns will stay positive for years even if the market crashes. Look how high it was in 1999. It sayed high for a long time as the market crashed.
Well to be fair its not my chart, just something I stumbled into while digging into evidence for and against Peters theory. I just found it interesting that if that 18 year cycle holds true like it has historically, we crossed back above the line in 2018 and should have on average return of 10% or better through 2036 (but it doesn’t look those returns are adjusted for inflation, but do include dividend reinvestment). A long term invester may do just fine holding… maybe…
That said it’s just one datapoint. I think I lean (or hope) for one last run up before a larger pullback, at least that’s how I’m positioned right now. Been layering into this correction, but ran dry of cash at about 4500.
I also think with many of the big firms calling for the SP500 to be at around 4900 in 2030 is another point in favor of Peters theory (I think that was BA). Either they’re see a significant drop and recovery or a lot of volatile sideways trading. Either way I’d like to do better than 10% before inflation. Appreciate the thoughts from all.
so, did I understood correctly? last few weeks you were talking about rise on S&P 500 that we are still in front of big rally and now what? are you change your thoughts? and if is change is nothing wrong but what happened that you change your opinion ?
Peter has been saying a small correction like we’re seeing was possible if not likely before we another run to a new ATH. Then when the fed starts raising rates instead of talking about it, we could see the pullback he’s talking about. These are videos he made to post while on vacation. They’re talking longer term.
I’ve been layering in as the market has been sinking. Hopefully we’ve hit bottom. SP500 futures are looking good for Monday as of now so there’s a little hopeium for the day 😉
Yes after a bottom seems to be making next step is FOMO move. Just wondering what the narative is going to be.? Just a too much cash on the sideline or a narrative the bond marked has corrected itselves sp FED will not raise rates as agressive (as they properly need in order to handle inflation,)
Comment welcome
Will Gold and Silver initially crash, if/when the SP, Dow, Nasdaq crash (in other words, will all asset classes including Bitcoin initially see a pullback)?
Another well thought out video. I’m going to play devil’s advocate here. If you look at the chart of the velocity of M2, it looks like it has been falling off a cliff, especially starting in 2009. This is when Fed started lowering rates and introducing quantitative easing every time the economy starts to get week. On top of that government policies since then have funneled money to savers. I don’t think the Fed and government have ever been this friendly to investors in prior history.
This indicates to me that more and more money is going to asset holders, and it has resulted in inflated PE’s, home prices, etc. If we continue on this trend, then what is to stop PE’s from going higher and higher, thus breaking the reliability of the charts you presented? Also if you chart the trajectory of DJI/gold it seems to indicate the DJI has a lot more room to go higher (vs gold) before it tops out.
I’ve had similar thoughts. Also how easy it is to get into the market with technology these days compared to historically casts a shadow over what the PE picture is telling us. Money that used to be with banks or stuffed under a mattress is being put into the market. That doesn’t mean it can’t stay there going forward even if it gives us inflated PEs. At least for a time.
To follow up on my last comment: Is there mathematical top to how high PE ratios can go, and how do you determine it? Seems like since 2009 we’ve had a Fed “put” in place. Investors have faith that if the market drops too low, the Fed will eventually jump in with lower rates and quantitative easing. Sure that is difficult right now because of inflation, but that will likely subside in a year or two. The government is likely to lower taxes again and distribute more stimulus if the market collapses too far. The more I think about it, the harder it is for me to get too bearish notwithstanding some unforeseen large macro event or the election of a socialist leaning government majority or the election of the Fed who is no longer willing to support the market. The Millennial generation will also act as a tailwind at least until 2029. My dad has taught me that a good time to sell is prior to a Presidential election. If you do that then you will be safe from such a circumstance and either way you’ll be able to buy back at cheaper prices.
Thanks for the insightful video. Peter – I remember you showing a chart marking the date of first rate hike (or announcement) to the S&P once but I can’t find it anywhere. Do you know which video?
@ GOT What your expectations on USD? Are you still expecting a drop, wharts the forces behind and can you maybe in a comming video elaborate over the moves above 97? Are your thesis still valid on need to be adjusted sligthly? Incl gold and emerging markeds. Thanks
Thanks for reinforcing my previous comments on a previous video that time in the market is not better than timing the markets. I believe we have ~6-12 more months of stock market euphoria. This is somewhat based on midterm elections. IMO the market may still be a little rocky in the next few weeks or could take off, depending on who the FED decides to put on camera and what they say. Do you still predict a blow off top? I haven’t heard you mention blow off top lately. I am not so sure myself of a “blow off top” without significant changes in the FED’s policy in the next 2+months.
so combing this and yesterday’s video on portfolio concentration, would it be good to concentrate on BTC + Gold for the next 5 years? thanks
Bitcoin looks particularly oversold here with many metrics pointing big players stepping back into the asset.
Sentiment is very bearish with Fed fear peaking, these conditions are setting up crypto and equities for nice rallies over the next few months (with the possibility of retesting the lows).
Gold has had a tough time with a stronger dollar and rising yields. Although we could see a weaker dollar, rising yields will likely remain a headwind over the next few months.
However, investors who seek to have a diversified portfolio (and not look to time particular market environments) can invest in both Bitcoin and Gold (during big dips like we’ve recently seen on both assets) and hold for the foreseeable future to take advantage of a “monetary debasement” environment (with Bitcoin taking advantage of risk-on debasement and Gold taking advantage of risk-off debasement).
thank you, was expecting a simple yes or no but that answer is very detailed and awesome.
@ GOT What your expectations on USD? Are you still expecting a drop, wharts the forces behons and can you maybe in a video elaborate over the moves above 97? Are your thesis still valid on need to be adjusted sligthly? Incl gold and emerging markeds. Thanks
This is the first time I have heard about the PIE ratio. Thank you for enlightening me. So then based on this, do you suggest gold / silver / Bitcoin? What about real-estate considering current PIE ratio conditions?
I think you might have made a mistake in how you compared the Price/Integrated Equity chart returns with the Asset Allocation chart returns. The former is for the full forward 10 year return (you said annualized), the latter is based on annualized return. Otherwise this would make no sense as one has -10% and the other has -2% as the forward returns, so they have to be for different time scales.
Would the numbers make sense if the P/IE chart was annualized return, inflation adjusted? It is at about -8 to -9%, and that would line up with the asset allocation chart (not inflation adjusted) at about -2 to -3% if inflation were about 6%.
Losing 9% of purchasing power for 10 years would leave you with about 39%. This would be almost as bad as the 70s.
I just wonder if dividends are left out of these charts. It certainly is for the SPX chart. I think it is also for the P/IE and asset allocation charts.
Otherwise, great content – love the videos
In 1972 my favorite candy bar was a Three Musketeers Bar it was about six inches long and I could buy one with my paper route money for 5 cents. By the time I started working on the farm in 1978 it was half the size and a dime. My vivid recollection of monitoring debasement.
It’d be really good for an updated S&P video after such a volatile week and then close higher. Would appreciate
Yes will be taking the time to post an update this weekend or for Monday per-market.
Thank you Peter, really looking forward to it
I’m really interested in knowing current sentiment readings on the s&p
Also inverse ETF positioning etc
In Macro Dashboard for S&P 500 information is also looking a bit outdated for short term perspective, could you please check it as well.
I feel like this chart would counter that argument. Puts a bullish case for the next 10 years… thoughts? Not sure if it’s different now as it was plucked together in 2019….
https://static.fmgsuite.com/media/documents/bc618705-6161-4c00-be7f-c667c90c61b5.pdf
Will be looking at other data sources on rolling returns.
The chart you’ve shown seems to have distorted numbers.
In 1984, 10-year stock market returns had been extremely poor and no where close to what the chart suggests.
I think the chart provided is correct. Here is another source: https://www.crestmontresearch.com/docs/Stock-Rolling-Components.pdf HOWEVER – if the time horizon for investments are 20-30 years compared to making money consistently in every market regime it is quite bad to stay 100% invested into S&P500. If the market regime is going into STAGNATION and later DEFLATION this year then reduce your allocation to S&P 500 now when (and if the rally continues for the next month) and then buy back in at much more favorable prices and hold for many more years to come. Peter – I wish you provided clearer insights into what market regime we are going to in the next couple of months and adjust your advice to that in combination with the chart analysis you are providing. I know you have been quite bearish on US Longer Nominal Bonds (+20 year like TLT EDV ZROZ). Those and my dollar positions I was building up during the bearishness at the market top since my assessment is that we are heading into stagflation – check out econpi.com – that’s great site for economic growth and credit analysis to understand where we are heading. Our US economy is clearly declining above the baseline. When we are contracting below the baseline in a few months then watch out. No longer am I bear on longer term US Bonds and US Dollar compared to other currencies. Stagflation first then Deflationary Bust then many many years of GOLDILOCKS like Brad Hill suggests in the 10 year average rolling returns (which I agree with 100%).
@ Brad HIll: I don’t think this is a contradiction because it is trailing 10 year total returns and the asset allocation chart predicts forward 10 year price returns.
@GOT: the trailing 10 year price returns in 1984 were roughly 5%. What were dividends then? Weren’t they about 5% too? That would make the trailing 10y TR chart that Brad posted correct.
I see what you’re saying. The way I read it was from 2018 to 2036 the rolling 10 year average should be higher than the 10% historical average before inflation. That’s the 18 year period they’re talking about. Maybe when inflation is factored in we get the picture Peter is seeing. I think historically the average after inflation was 6% to 8%. If inflation is worse than historical or the pattern doesn’t hold…
Your reading is correct.
The chart is accurate.
Sorry, I was sloppy because I didn’t want to be too long.
1) I don’t see a good reason why the sine wave in the diagram should continue. Two instances is hard to draw a strong conclusion of a repeating pattern. It’s predictive power is more like the DOW/Gold chart. There is really nothing to prevent the chart from doing whatever.
2) If the bars are decreasing, even if above 10%, you are likely losing money in the moment.
3) The asset allocation chart has a long history of accurately describing the next to year’s returns. It has been making very specific predictions that have mostly come true. There is also a causation in the correlation as when asset allocation is high, there is likely to be selling, and then stock asset allocation is low, there is a lot of dry powder.
Cheers.
I think it’s correct if you look at it with dividends reinvested. It’s not adjusted for inflation though. I just hadn’t heard this rolling average over an 18 year cycle theory before. It looks like we crossed the line in 2018 and should have better than expected return through 2036 (over a 10 window, which is a longer period than I’m looking at other than 401k). I’m more looking to beat this over the 1-3 year, hence why I’m here. Just thought it was an interesting datapoint that contradicts a sustained long term recession in the future. Not that I means it’s impossible. Lots has changed since 1937 lol. Looking forward to see the other charts you pull.
I agree the charts are correct. But investing in the stock market 10 years after the inevitable stock market crash and great financial reset is too risky for me. I day trade, swing trade and invest, but will probably mostly swing trade once that time comes. And yes I do think a reset is coming. Just follow what is going on in domestic politics, geo-politics, and the global financial systems. It is right in front of our eyes.
You are correct Brad. Please see my comment to Peter. Good luck navigating these challenging markets. If you are shorter term investor (speculator) and want to say invested in alignment with the market regime we are heading into I can recommend taking a look every saturday on https://econpi.com
Brad’s chart does NOT predict good returns over the next ten years. We’ve been on such a good run that trailing 10 year returns will stay positive for years even if the market crashes. Look how high it was in 1999. It sayed high for a long time as the market crashed.
Well to be fair its not my chart, just something I stumbled into while digging into evidence for and against Peters theory. I just found it interesting that if that 18 year cycle holds true like it has historically, we crossed back above the line in 2018 and should have on average return of 10% or better through 2036 (but it doesn’t look those returns are adjusted for inflation, but do include dividend reinvestment). A long term invester may do just fine holding… maybe…
That said it’s just one datapoint. I think I lean (or hope) for one last run up before a larger pullback, at least that’s how I’m positioned right now. Been layering into this correction, but ran dry of cash at about 4500.
I also think with many of the big firms calling for the SP500 to be at around 4900 in 2030 is another point in favor of Peters theory (I think that was BA). Either they’re see a significant drop and recovery or a lot of volatile sideways trading. Either way I’d like to do better than 10% before inflation. Appreciate the thoughts from all.
Yes, thank you for finding the chart.
Hi Peter,
I like the fact that you seem to be a contrarian-investor not giving in to the recency-bias of current price-movements.
CONTEXT is so important and I like your short video on this matter.
Looking forward to your video on the latest developments in SPX (and the stock-markets in general) that have caught so many off-guard.
We were/are prepared 🙂
All the best
MMM (Mathias)
P.S.: In the future, no more holidays at the beginning of the year … or at least only for a couple of days 😉
so, did I understood correctly? last few weeks you were talking about rise on S&P 500 that we are still in front of big rally and now what? are you change your thoughts? and if is change is nothing wrong but what happened that you change your opinion ?
Peter has been saying a small correction like we’re seeing was possible if not likely before we another run to a new ATH. Then when the fed starts raising rates instead of talking about it, we could see the pullback he’s talking about. These are videos he made to post while on vacation. They’re talking longer term.
I’ve been layering in as the market has been sinking. Hopefully we’ve hit bottom. SP500 futures are looking good for Monday as of now so there’s a little hopeium for the day 😉
Yes after a bottom seems to be making next step is FOMO move. Just wondering what the narative is going to be.? Just a too much cash on the sideline or a narrative the bond marked has corrected itselves sp FED will not raise rates as agressive (as they properly need in order to handle inflation,)
Comment welcome
Will Gold and Silver initially crash, if/when the SP, Dow, Nasdaq crash (in other words, will all asset classes including Bitcoin initially see a pullback)?
Another well thought out video. I’m going to play devil’s advocate here. If you look at the chart of the velocity of M2, it looks like it has been falling off a cliff, especially starting in 2009. This is when Fed started lowering rates and introducing quantitative easing every time the economy starts to get week. On top of that government policies since then have funneled money to savers. I don’t think the Fed and government have ever been this friendly to investors in prior history.
This indicates to me that more and more money is going to asset holders, and it has resulted in inflated PE’s, home prices, etc. If we continue on this trend, then what is to stop PE’s from going higher and higher, thus breaking the reliability of the charts you presented? Also if you chart the trajectory of DJI/gold it seems to indicate the DJI has a lot more room to go higher (vs gold) before it tops out.
I’ve had similar thoughts. Also how easy it is to get into the market with technology these days compared to historically casts a shadow over what the PE picture is telling us. Money that used to be with banks or stuffed under a mattress is being put into the market. That doesn’t mean it can’t stay there going forward even if it gives us inflated PEs. At least for a time.
To follow up on my last comment: Is there mathematical top to how high PE ratios can go, and how do you determine it? Seems like since 2009 we’ve had a Fed “put” in place. Investors have faith that if the market drops too low, the Fed will eventually jump in with lower rates and quantitative easing. Sure that is difficult right now because of inflation, but that will likely subside in a year or two. The government is likely to lower taxes again and distribute more stimulus if the market collapses too far. The more I think about it, the harder it is for me to get too bearish notwithstanding some unforeseen large macro event or the election of a socialist leaning government majority or the election of the Fed who is no longer willing to support the market. The Millennial generation will also act as a tailwind at least until 2029. My dad has taught me that a good time to sell is prior to a Presidential election. If you do that then you will be safe from such a circumstance and either way you’ll be able to buy back at cheaper prices.
Thanks for the insightful video. Peter – I remember you showing a chart marking the date of first rate hike (or announcement) to the S&P once but I can’t find it anywhere. Do you know which video?
@ GOT What your expectations on USD? Are you still expecting a drop, wharts the forces behind and can you maybe in a comming video elaborate over the moves above 97? Are your thesis still valid on need to be adjusted sligthly? Incl gold and emerging markeds. Thanks
SPROTT uranium trust is going public by late summer would think this is a good time to buy the miners. ?????!
Thanks for reinforcing my previous comments on a previous video that time in the market is not better than timing the markets. I believe we have ~6-12 more months of stock market euphoria. This is somewhat based on midterm elections. IMO the market may still be a little rocky in the next few weeks or could take off, depending on who the FED decides to put on camera and what they say. Do you still predict a blow off top? I haven’t heard you mention blow off top lately. I am not so sure myself of a “blow off top” without significant changes in the FED’s policy in the next 2+months.