Before discussing individual financial markets, I want to reiterate my mandatory “Ground Rules”:
- Spend less than you earn
- Live within—or preferably below—your means
- Prioritize capital preservation over capital appreciation
- Winners and losers are separated not by how much they make, but by how much they avoid losing.
- Better to be a live chicken than a dead duck
U.S. Stock Market – Although I am far from bullish, I have consistently maintained that a stock market crash was unlikely. That is no longer my view. The market now resembles earlier crashes and is flashing several strong bearish technical signals.
While the S & P 500 Index has made a new, all-time high, it’s masking a bear market already underway for many of its members:
The S&P just hit its highest level of negative beta. As the S&P 500 goes up, the highest level of stocks ever are moving in the opposite direction. A small percentage of AI-related Tech stocks are holding up this house of cards.
Equity portfolios should now consider substantial bearish strategies, at minimum bearish call spreads. In my admittedly biased view, RILAs have never been more prudent.
U.S. Bonds – At the end of 2021, I made what may prove to be my best investment call: sell all U.S. Treasuries and buy gold instead. My five-year target of a 5½%–6% yield on the 10-year Treasury is now within sight.
Wall Street’s “Don’t Worry, Be Happy” crowd has urged investors to buy throughout this period, leaving clients with losses. They now argue that inflation will peak and interest rates will fall. I believe rates are rising less because of inflation fears than because the world has awakened to our enormous debt and deficits, doubts about our ability to service that debt, and competition from other global bond markets.
I would also be highly cautious about corporate bonds.
Gold – I have good news and bad news. The bad news is that the weakness we have seen could continue, at least to a retest of the July lows—or perish the thought, even lower.
The good news is that, even if this occurs, the downside risk is about $500, while the upside potential is ultimately $5,000 over the next three to five years.
Silver – Although it is no longer like “kissing your sister,” silver remains tied to gold’s performance. Expect comparable downside risk and upside potential.
Copper – Unlike gold and silver, where I correctly abandoned my bullish stance and avoided the corrections, I have remained firmly bullish on copper. When I first went long several years ago, my slogan was: $4 in ’24, $5 in ’25, $6 in ’26, and $7 in ’27. That conviction remains strong; to me, $7+ is not a question of if, but when.
Mining and Exploration Stocks – A further 10%–20% decline is possible, but this is the one sector I am comfortable owning for the long term. I am especially bullish on Canadian-based opportunities. I may also take a renewed “shine” to uranium shares, but only at significantly lower levels. I will not provide specific shares and prices, but I will let you know if the group becomes attractive again. Having twice earned triple-digit gains in these shares, I believe they are worth watching now.
Although I stopped speaking regularly at conferences more than a dozen years ago, I am taking an “Old-Timers’ Day” approach by appearing at events in Montreal, Quebec City, and Boca Raton. Details to come.
Yes, I tend to take the road less travel.
