When stocks as an asset class are in a strong uptrend, or “bull market” as some like to call it, they don’t just perform well on an absolute basis, but they also tend to outperform their alternatives. Two perfectly good alternatives to owning stocks are Bonds and Precious Metals.
As you can see in this chart, in early March the S&P500 broke key support relative to both US Treasury Bonds and Gold. All of that former support since 2018 “should” turn into resistance, based on our polarity principles.
And it did:
To be clear, it’s perfectly normal to expect that former support will turn into resistance. That’s Supply & Demand 101 and the higher probability outcome, even if only temporary.
And that’s my point here. What if the S&P500 is able to get back, and hold, above those former relative lows from 2018 & 2019? What then?
But look at how well Gold and Bonds have held up during the rise in stock prices:
The question we’re asking here is simple: Does the resilience in Gold and Treasury Bonds mean that they are still the assets we should favor?
Or does the S&P500 finally get back above those former relative lows, and bonds and gold roll over?
Or do they all work their way higher together?
We’ll do our best to answer these questions, as well as many other developments we’re seeing around the world, on Monday night’s (Premium) Conference Call. You can register for that here, if you haven’t already.
Let me know what you think: