Week ahead - June 29th - July 3rd, 2020 - must read
Technicals:
The 10 year yield is in a downtrend, this is bearish. We broke every uptrendline no matter how you draw it (means we are either going sideways or dumping). Sell signals on the weekly charts. Macd bearish, stochastic rsi bearish etc. If we crash here we could see everything take a hit Gold, Silver, miners, commodities, foreign stocks, but the areas that I just mentioned are the long term opportunities.
Fundamentals: why the us market is long term bearish:
The number 1 driver of the 10 year bull market has been corporate stock buybacks: (because of 0% interest rates and Trump tax cuts). Now earnings have dropped 43% and many including the banks have stopped buybacks in fact, some are starting to sell more shares onto the market. However, the Robinhood traders have taken the place of the buyback TEMPORARILY. The betting odds in Vegas have Trump as a long shot. Under Biden corporate taxes would likely go back up to Obama levels and capital gains tax could go to income tax levels. Corporate tax increases would reduce earnings and prevent buybacks. Capital gains tax increases would cause more investors to try to avoid taxes rather than grow. Corporate Bond market is still a bubble being held together buy the fed, normally interest rates would be much higher which would cause at minimum the unprofitable companies like Uber, Tesla and others to go bust. If the dxy, dollar index starts to fall (which I am bearIsh on the dxy going to cover this in depth sometime) this is bearish for us stocks and foreigners that have previously bought us stocks will want to sell the high valuations and move into foreign stocks with better fundamentals at lower valuations and with a stronger currency. Especially with us tax/regulation increases and decreases in productivity.
Look at valuations I think we have a high probability of a lost decade in us stocks with little upside and lots of downside. Most expensive ever in terms of gdp, close to most expensive ever in terms of earnings, and yet the fundamentals of US economy are the worst ever. With that being said if we get hyperinflation us stocks are going to the moon, but in terms of real purchasing power you want to be in Gold, miners, commodities, foreign stocks.
The 10 year yield is in a downtrend, this is bearish. We broke every uptrendline no matter how you draw it (means we are either going sideways or dumping). Sell signals on the weekly charts. Macd bearish, stochastic rsi bearish etc. If we crash here we could see everything take a hit Gold, Silver, miners, commodities, foreign stocks, but the areas that I just mentioned are the long term opportunities.
Fundamentals: why the us market is long term bearish:
The number 1 driver of the 10 year bull market has been corporate stock buybacks: (because of 0% interest rates and Trump tax cuts). Now earnings have dropped 43% and many including the banks have stopped buybacks in fact, some are starting to sell more shares onto the market. However, the Robinhood traders have taken the place of the buyback TEMPORARILY. The betting odds in Vegas have Trump as a long shot. Under Biden corporate taxes would likely go back up to Obama levels and capital gains tax could go to income tax levels. Corporate tax increases would reduce earnings and prevent buybacks. Capital gains tax increases would cause more investors to try to avoid taxes rather than grow. Corporate Bond market is still a bubble being held together buy the fed, normally interest rates would be much higher which would cause at minimum the unprofitable companies like Uber, Tesla and others to go bust. If the dxy, dollar index starts to fall (which I am bearIsh on the dxy going to cover this in depth sometime) this is bearish for us stocks and foreigners that have previously bought us stocks will want to sell the high valuations and move into foreign stocks with better fundamentals at lower valuations and with a stronger currency. Especially with us tax/regulation increases and decreases in productivity.
Look at valuations I think we have a high probability of a lost decade in us stocks with little upside and lots of downside. Most expensive ever in terms of gdp, close to most expensive ever in terms of earnings, and yet the fundamentals of US economy are the worst ever. With that being said if we get hyperinflation us stocks are going to the moon, but in terms of real purchasing power you want to be in Gold, miners, commodities, foreign stocks.
Comment:
I encourage discussion in the comments
