Transcript:
Tom Vaughan:
I do like to start off though, the week with a summary of kind of what I saw happening in the market this weekend. Really amazing timeframe. Of course, if you recall last Friday, it was talking about how we’ve had two great weeks in a row at that point. And generally speaking, they don’t come straight back all the way the market can only stretch so far before it has to kind of snap back, I was expecting some type of pullback Monday, it went up Tuesday, it went up a lot, actually. So I wasn’t sure if that was going to work out. But Wednesday and Thursday came down. And I’d said yesterday in the video that it probably needed to come down a bit more to get to some more important support levels, did that this morning actually hit the kind of around 4500 on the S&P 500. There’s a lot of support there. And it bounced off of that. And we’re up a little bit about point 2% right now on the s&p as we speak, right this moment. So I suspect though, that we’ll kind of waffle around a bit here. Before we might take off again, I do think earnings as they come out will be the big catalyst to really get us moving. As I’ve said all week, I think that the next leg up if we have one could be quite strong, could have some institutional involvement, also, with institutional money coming in, just because they won’t be able to sit on the sidelines if this thing does continue to move forward. So very, very interesting.
And one huge piece of information you’re going to be hearing a lot about is what’s called the inverted yield curve. So what that means is that the two year Treasury is paying more than the 10 year treasury. And this is a pretty good signal for recessions. About two thirds of the time, when you get an inverted yield curve, you end up with a downturn. recession in the economy, and essentially, about 18 months is the average timeframe for when that happens. So yesterday for a little bit of time, we had an inverted yield curve, and what have you, too. So here’s my thoughts on this. So much of what’s happening right now. And so much of the misinterpretation of what has happened in the past. And why it’s not really working as much here is because in the past, we didn’t have a pandemic. And here we have a pandemic, the pandemic is causing all kinds of different things. We look to the past, we look at inflation, and we say, Okay, this is what happens with inflation. All that inflationary past that we’re looking at didn’t have a pandemic. So totally different reason for inflation, totally different solutions for what’s going to create, you know, a better inflation environment. Same thing here with this yield curve, we look back at the yield curve, you know, and see how many times it’s been accurate and those types of things. It didn’t include a timeframe when the Federal Reserve increase their balance sheet from 1 trillion to $9 trillion, in about a year and a half. In buying bonds, a lot of those are treasuries in trying to stimulate the economy and bringing liquidity into the market. Well, the Federal Reserve, just you know, on March last month here, stopped buying Finally, these bonds that they’ve been doing, and now they’re even talking about possibly selling off some of the bonds that they have in their balance sheet, or letting some of those bonds you know, dissipate by letting them expire without re buying them. Those types of things.
All of these things are going to have unusual circumstances happen in the treasury market, I would be really cautious to be looking at what’s happening right now on a historical context and say, Hey, this inverted yield curve is going to create this inflationary situation. I really prefer the three month versus 10 year. Look in terms of the yield curve. And right now that why that spread is actually widening, showing what I think is an even more economically explosive scenario that we’re dealing with going forward. So anyway, there’s something we’ll be talking about, you’ll be hearing about, he just wanted to kind of let you know, we do have one other thing going for us right now. That’s kind of interesting. I don’t know if everybody knows this, but April. According to the stock traders Almanac is the number one month for rate of return going back to 1950. So avatrade return in April is 1.7%. Not bad. Even more impressive. The last 16 April’s in a row have been positive. And maybe this April’s different but we do have a seasonality behind us that could help at least hold the market up for a while until we can get some more buying to come in. You know, when you start to come back down, you’re either kind of pulling back for a bit to create some more momentum to kind of come up again, I think that’s the most likely scenario. But the other scenario, of course, is you could be coming all the way back down to some new low. I’d be a little surprised to see that especially without some other major catalysts that would cause that. But I’d be surprised to see that I’m just the what we already have and no right now, just because we’ve had so much momentum to the upside of there’s going to be an awful lot of people that want to jump back in. If it does start to go again. So, really fascinating week things have worked out pretty much as expected. I would expect next week to be a little soft also. But you never know I one thing I have been surprised about in the last really two years, is how fast and shallow these dips have been. The amount of money that comes in pretty quickly has been pretty surprising. We used to get much longer dips, in my opinion. And so we’ll see how this works as far as that goes on this particular recovery timeframe. So look forward to seeing what’s going to happen next week. Thank you very much.