A Simple Indicator To Predict What Markets Will Do
You don't need a master's degree in economics to know how to use it.
One of the best indicators for fast-growing stocks is the US 10Y bond. This works a little ahead of the other indices and gives us a pretty good view of the markets' direction.
So the process is as follows, when the US 10Y bond rises (green line), the Nasdaq tends to fall back sometime later (blue line), and vice versa.
Please don't stop following us for this reduction to absurdity. It doesn't take a genius in economics to know this.
What is really strange is that many people were surprised at the end of 2019 when Nasdaq pulled back by more than 20% in a few months. Again, the same thing was proven. First, the bond goes up, and then the stock market goes down. Then the bond goes down, and then the stock market goes up...
Even if we look at it on a much larger scale, this theory still works very well.
What is the reason for this?
Very simply, bonds "belong" to governments, and governments do many things except generate value. They print a lot of money, which devalues their bond, making the return much lower, while this money ends up in the companies that actually provide value.
Apple, Microsoft, Amazon, Google, etc. They help us make our lives better every day. They give us tools that bring value.
Today, money is not worth anything. Just say to the people of Germany that if they want to invest in government bonds, they have to do it by losing 7% per year of purchasing power.
Are you aware of what this means: "Leave your money here, and I promise you that you will only lose 7% a year".
The increase in people and money means that there are fewer resources for everyone and that raw materials are worth more. The visionary Elon Musk has already said so.