This ‘Deflationary’ Bull Markets Ending – And Here’s What’s Coming Next For Investors
After many years of cheap money and asset bubbles – it looks like the upside is finally over.
That is – the potential upside against the amount of risk taken on – is over.
I often write about investors needing to find asymmetric (low risk – high reward) opportunities. And lately – as I’ve written about earlier this month – many key indicators are now flashing potentially huge downside ahead.
As I wrote then – it’s not like I’m predicting markets to tank tomorrow. Or even next week.
But what I’m getting at is that there’s significantly more risk ahead than reward – at least for the general market and equities.
I’m not alone thinking this way. . .
Bank of America & Merrill Lynch (BAML) recently published a white paper with an interesting trading suggestion. . .
First, they show us that the nearly 10-year monster U.S. bull market has been highlydeflationary. And in case you forgot, deflation refers to when there’s an overall decline in the prices of goods and services.
The ‘deflationary assets’ group includes U.S. investment grade bonds, government bonds, the S&P 500, ‘growth stocks’, U.S. high yield credit, and U.S. consumer discretionary equities (aka non-essential goods – such as luxury goods, entertainment, automobiles, etc.) . . .
And the ‘inflationary assets’ group which includes commodities, developed market stocks (excluding U.S. and Canada), U.S. bank stocks, ‘value stocks’, cash, and treasury inflation protected securities (aka TIPS) . . .
Since the end of the 2008 crash – the Fed embarked on a ‘easy money’ and expansionary path via ZIRP (zero interest rate policy) and QE (quantitative easing; aka money printing).
But even after all this – deflationary assets have seriously outperformed inflationary assets. . .
…click on the above link to read the rest of the article…
