First, I should acknowledge the bold decision I made at the end of 2021.
At the time, almost no one was urging investors to sell all U.S. Treasury bonds—assets I expected to lose value for years—and move into gold, which I also felt would far outperform broad U.S. equities.
From January 1, 2022, to today:
10-Year T-Bond Total Return: down more than 10%
S&P 500 Total Return: up 77%
Gold: up 137%
What People Have Said About Me – Hi Peter. You’ve often said only one person followed your advice years ago to move out of stocks and bonds and into gold. I wanted you to know I did, too. I’ve followed your work closely for more than 20 years, and through every market cycle, I’ve trusted that you were sharing your honest views while being transparent about your financial interests and potential biases. You have been right far more often than wrong, and your free commentary has helped countless people. On behalf of everyone who has benefited from your guidance, thank you! Brian W.
But in a business where people ask what have you done for me lately, the obvious question is: what now?
Before getting into specifics, here are several key guidelines—more relevant now than ever:
- Spend less than you earn—something many Americans, and certainly the government, are not doing.
- Living within your means is essential; living below them is wiser as government revenue demands grow and everyday costs keep rising.
- Prioritize preserving capital over growing it, seeking only modest gains through structured products designed to limit downside risk.
- In the years ahead, success may depend less on what you gain and more on what you avoid losing.
- Many financial advisors and clients have never lived through a true, prolonged bear market, so accepting that markets can move sharply both ways may be difficult.
- Passive investing, a major driver of the equity bull market, works both ways, even if it has mostly moved in one direction so far.
- America’s dominance on the world stage has ended, and Trump has hastened that decline.
- These ten factors are still worsening.
With my usual ground rules in place—and knowing how well the last five years, the past year, and even this year have gone for me—I now look into my crystal ball, fully aware that I will keep learning how to eat broken glass over time.
I continue to favor gold over broad U.S. equities and Treasury bonds, though I believe T-Bonds may perform much better this time relative to the S&P 500. If the 10-year yield rises well above 5% and stays there—a coin-flip possibility for now—it could become the strongest competition equities have faced in years. Emerging equity markets also look more attractive than the U.S. market, in my view; at worst, they may prove to be the lesser of two evils.
With U.S. high-yield bond spreads nearly half below their historic norm, I believe investors should favor Treasuries over junk bonds going forward. Personally, I couldn’t own corporate bonds at this time.
The next few weeks could shape the bond market for months, if not years. Last week’s inflation numbers only covered data through August 11, so the Fed knows the next report is likely to be worse. There is a better chance of the Jets playing the Giants in the Super Bowl than of the Fed not raising interest rates. The key will be how the bond market reacts after the hike—and you can follow my X page for my take.
Like Trump, Treasury Secretary Bessent is quite arrogant and has failed to deliver on most of what he predicted. His “I Am The House Now” attitude will come back to bite him.
The upcoming elections will also have a major impact on the bond market. Stay tuned.
I’ll be here if you need me:
