How Many Negatives Make a Positive?

How Many Negatives Make a Positive? For all intents and purposes US and Canadian real interest rates are now negative across most of their yield curves.  Should investors listen to the bond market which sits at historically low and negative interest rates or the S&P500 that is again flirting with all time highs?  TRI advises caution for risk assets, as the topping process for equities continues and we do not yet have enough negatives to make a positive risk/reward profile for risk assets. The business cycle is declining and on the cusp of contraction.  The Federal Reserve and the European Central Bank confirmed this as they lowered there key short-term lending rates again and are again implementing various forms of Quantitative Easing. Source: Tradingview.com Longer term (10 and 30 year) US nominal interest rate now average around 2%. As seen below, US inflation is averaging about 2%.  Two minus two equals zero. The 10-year term real interest rates are -0.3%.   Even the 0.25% countertrend bounce higher in interest rates since early September has not put a dent in the downtrend in rates. Source: www.bls.gov Daily and monthly cycles and trends are bullish for the bonds, while the weekly cycle and…

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Another Trap Ahead for Both the Bears & Bulls?

Another Trap Ahead for Both the Bears & Bulls? The topping process for equity markets is just that, a process. The process catches many investors off guard as the numerous twists and turns whipsaw their conviction and positioning.  TRI’s anticipatory indicators continue to point to significant economic headwinds in the year ahead.  TRI believes this will result in risk assets being re-priced materially lower.  But before we get there, the risk markets appear to be setting up two more traps, one for the bears and then one for the bulls, before the larger degree sell-off materializes into Fall 2019 / Winter 2020. Source: Tradingview.com Bulls and bears alike have become more polarized from the current market action.  TRI is neither a perma-bull, nor a perma-bear.   TRI’s endeavors to provide independent and objective market insights and portfolio management through a proprietary and repeatable investment process anchored around the business cycle. TRI process is probability based, as there are not guarantees or certainties with investing.  At times TRI might be early or late on call and will openly acknowledge misses or changes in our expectations as new information surfaces. TRI’s goal is to protect our client’s capital and grow it regardless of…

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Risks Are Rising, Breadth Is Falling

Risks Are Rising, Breadth is Falling The S&P 500 has rallied to the 2,800/80 resistance zone with an increasing number of negative divergences, hinting that the move from Dec 2019 is close to a finale.  The Canadian Financial sector is likely to correct greater than 15%, as it moves into the 4-year cycle low. The move down in Can 10-year rates is stretched and rates can consolidate or even have a counter-trend bounce higher as it digests recent price action below the 1.80% resistance level. Market Trends The S&P 500 daily cycle is in the final stage of topping, which will lead the topping of the weekly cycle as well. Can10yr rates triggered a daily sell signal, but this move into the daily cycle low should be counter-trend move before rates continue lower. USDCAD daily cycle is topping, while longer-term weekly and monthly cycles remain positive. TRI Cycle & Trend Signals* The TRI Cycle and Trend Signals are shown below.  These signals are as of market close on March 29, 2019.  Please see the TRI Overview document for further information. Source: Fieldhouse Capital Management Equity – Risks Are Rising, Breadth Is Falling The S&P 500 has rallied to the 2,800…

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Total Return Investor – October 2018 Commentary

Market Overview The global economy is facing numerous economic headwinds including higher interest rates and falling fiscal stimulus. TRI expects an increased level of volatility and re-pricing of risk assets in 2019 and early 2020.  TRI encourages investors to assess liquidity levels in their portfolios along with risk exposures to weather the potential economic slowdown that we believe is building steam. TRI recommends investors move their portfolios into a defensive structure to preserve capital and source income from highest quality and liquid assets. TRI expects great buying opportunities in late 2019 or early 2020. Macro Trends [Read the full report]...

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