Interest Rates Poised to Rise Along with Inflation; Time to Exit Bonds?
Outlook 2020/2021: Cycle Synergy; The More Things Change…
07-30-20 – The period between March 16 – 23, 2020 – when a powerful convergence of daily, weekly, monthly & multi-year cycles bottomed in multiple markets – and April/May 2021 (when corresponding cycles are projected to peak in a broader collection of markets) – has been forecast to witness an inflationary surge in stocks, Silver and many other markets.
That has been forecast, not surprisingly, to coincide with a 12 – 14 month decline in the US Dollar – a sell-off that was/is likely to resemble the 2017 drop. It has a primary downside target of ~89.00/DX but could see lower prices. If the Dollar is able to reach that level by Jan. 2021, it will perpetuate a decades-long pattern of Dollar declines during Republican administrations and advances during Democratic administrations – peaking in Jan. 2017 and declining into Dec. ‘20 or Jan. ‘21.
Before reviewing and updating those outlooks, it is a good time to address ongoing concerns and cycles regarding the current health, social and political climate – which seems unprecedented.
The More Things Change…
While it could be argued that some of these things are unprecedented, at least from a pure and literal basis, there have been recurring times when stress was at a similarly high level in America. One of those was in late-2001 when America was attacked as the dot-com bubble was bursting.
It could be argued that a far more synergistically-stressful time was experienced exactly 40 years ago. Consider the following events that were unfolding in 1979 & 1980:
— Runaway inflation leading to ‘unprecedented’ levels in interest rates (~20%). Prices in grains, foodstuffs, real estate, precious metals and a host of other items were completing the parabolic stage of a runaway bull market.
— Historically high unemployment beginning in April 1980 and remaining intact until late-1981. Hmmm.
— Beginning of S+L (banking) Crisis.
— Iranian/Islamic Revolution; Hostage-taking at American Embassy in Iran, leading to a ~400-day period of enormous geopolitical stress and repeated failures to rescue those Americans.
— The second oil embargo in a decade, leading to a resumption of gas rationing and ’unprecedented’ lines at gas stations.
(I can vividly recall going to get gas with a high school friend, in his ‘69 GTO convertible. We would bring a football, a frisbee, some snacks and sodas… just to fill the car up with gas.
Every few minutes, the gas line would move a bit, so one of us would jump in the car and pull it forward 20 or 30 feet… then turn it off and resume our activities in the surrounding area – often joining up with other drivers in a game of catch or frisbee… all the while Aerosmith, et al was blasting from a boom-box.)
— The Soviet invasion of Afghanistan (on Christmas Day, no less) – conjuring up Cold War fears of escalating US/USSR tensions in/around the Middle East.
— The resulting boycott of the 1980 Olympics.
— The similarly-resulting grain embargo against the Soviet Union (a bit like the recent trade war with China). The embargo was viewed as a spectacular failure that seriously harmed US farmers while ‘forcing’ Russia to turn to Ukraine and South America for a much larger percentage of their grain purchases (at cheaper prices) – a shift that never shifted back.
— The 7th and 8th years of a stagnant stock market that continually failed to exceed its Jan. 1973 peak. (It would take exactly a decade, until Jan. ‘83, for the Dow to give a monthly close above its Jan. ‘73 peak.)
— And let’s not forget the partial nuclear meltdown at Three Mile Island in 1979.
— China invasion of Vietnam (a forerunner of current activities in the South China Sea?).
— Abscam (FBI sting against members of Congress).
— Mt. St. Helens erupts in Washington state.
— Miami Race Riots following the killing of Arthur McDuffie (Dec. ’79) by four white police officers and their May 1980 acquittal. Sadly, the more things change, the more they stay the same.
— Beginning of Unabomber’s multi-year campaign of terror, including a faulty bomb in the cargo hold of AA Flight 444 from Chicago. Had it not malfunctioned, it would have ‘obliterated the plane’.
— Not to worry, the Georgia Guidestones were erected to provide a roadmap for global unity and extreme population control (now a popular focus for some).
You think its stressful now? You’re right. But it is hardly unprecedented.
Perhaps the big difference now is that you can be bombarded by the bad news 24/7 – exponentially increasing its negative impact and perception. It is not just bad news adhering to the 40-Year Cycle…
— It is also intriguing that 1979 was also when the US and China established full diplomatic relations. 2019 saw a good part of that obliterated.
— Also reinforcing the 40-Year Cycle, the first space shuttle (Columbia) was delivered to NASA during that prior period. 40 years later, SpaceX is reviving America’s space exploration pursuits. The more things change, the more they stay the same.
40YC of Inflation?
Getting back to the outlook for March ‘20 into May ‘21, three of the most significant forecasts have been powerfully validated in recent months. They are:
— New surge in stocks, after they fulfilled the Perfect Storm of Sell Signals triggered and described in late-Jan./early-Feb. ’20 and completed 2-Year & 40-Year Cycle declines on March 23, 2020.
That sell-off also fulfilled the ~11-Year Cycle of Stock Panic Cycles, ~11-Year Cycle of Global-Shaping Events and the 8-month & 16-month cycles that peaked in late-Jan. ’20 and projected sharp 1 – 3 month declines to follow.
Consistent with a majority of those factors, most stocks were forecast to set 6 – 12 month (or longer) lows by/on March 23 and then enter new advances that should ultimately carry them higher into April/May 2021 – the next phase of the 16-month cycle and another significant phase of the 40-Year Cycle. Multi-month buy signals were triggered on March 18 – 23.
— A major surge in Silver that was forecast to bottom on March 16 – 20, 2020 – along with an uncanny web of powerful cycle lows – and then enter a 12 – 14 month period where its gains were/are projected to substantially outpace the gains in Gold – even as all precious metals (and XAU) entered the culminating, often accelerated, phase(s) of a 5 – 6 year uptrend. A multi-month buy signal was triggered/published.
(In mid-March, Gold bottomed near 1450/GC while Silver bottomed near 12.00 – a ratio of ~120/1. This week, Gold spiked up near 2000/GC while Silver reached 26.00/SI – dramatically reducing that ratio to ~77/1 while validating the outlook for March ’20 – May ’21 to see proportionately greater gains in Silver as precious metals entered the most intense phases of their projected 2016 – 2021 advances.)
— US Dollar cycles peaked in March 2020 and projected an overall decline into 1Q/2Q 2021 that could easily take it to new multi-year lows (lowest levels since at least late-2014).
Not only would that fulfill multiple monthly and yearly cycles, it would also complete a 50% retracement in time of the Dollar’s 2008 – 2016 advance (105/106 months up followed by 52/53 months down).
When the three of those are combined, they show the potential for an inflationary advance from late-March ’20 into May ’21. Lower Dollar. Rising metals (precious and industrial). Rising stocks.
Add in massive government spending, to deal with a pandemic that is still out of control and the resulting economic debacle, and you have the fundamental factors for a declining Dollar and rising price inflation. This does NOT mean we are returning to the late-1970’s. The current environment is much different.
However, it does reinforce that this culminating period – of a 5 – 6 year uptrend in Gold, a 5-year (from early-2016) and 10 – 12-year uptrend in equities, and a 3 – 5 year corrective phase in the US Dollar – could/should see accelerated phases as most cycle crescendos do. More on those outlooks to follow…
Bonds & Notes continue to edge higher but are expected to peak in this time frame. They continue to climb from their late-2019 multi-month cycle lows and remain in overall multi-year uptrends.
However, the outlook was/is for a final spike high to occur during this mid-’20 (June/July ‘20) time frame. A peak in mid-2020 would fulfill a ~4-year low-low-low-low-high-high-(high) Cycle Progression dating back to the 1990’s and more recently timing peaks in mid-2012 and mid-2016.
Keep in mind, however, this does not automatically mean the perspective will shift from dropping to rising interest rates since that is rarely how tops unfold. Instead, the prevailing trend reaches an extreme – often surging (in the case of an uptrend, as is the case in Bonds and Notes) to higher levels than what prevailing fundamentals support.
The market will remain there (precariously) for a period of time until that euphoric bullishness begins to fade. That is when initial selling emerges. That selling is rarely the immediate start of a new trend but rather a topping process that must unfold in order to shift from one expectation to the opposite.
So, this (now) is when the topping process is expected to begin. However, it could be some time before anyone begins to talk about interest rates creeping up. The first stage is that they will not be so convinced that rates must continue to go down.
Longer-term investors and hedgers can begin to liquidate long positions in Bonds & Notes and start to watch for [reserved for subscribers] in order to initiate selling.” TRADING INVOLVES SUBSTANTIAL RISK!
Bonds & Notes are poised to set a major, multi-year peak (and corresponding bottom in interest rates) in/around July ’20 – while fulfilling analysis for a final, wave 5 of V advance into a multi-year peak in July ’20. At the same time, a myriad of factors are projecting an initial surge in inflation between now and mid-2021 (the first of multiple phases). Stocks & Silver (representing paper & commodity inflation) triggered 6 – 12 month buy signals in sync with multi-year cycles that bottomed on March 20 – 27 and with stocks projecting a new 12 – 18 month advance into May ‘21. Bonds could/should begin to fall when the masses recognize this next stock market rally and first stage of a multi-year inflationary period.
2020/2021 represent final, culminating years of 40-Year & 80-Year Cycles (see Nov ’19 INSIIDE Track) – timing everything from War (watch late-2021 into late-2025), Climate (Drought Cycles peak in 2021/22 and transition to Deluge Cycles in 2022/23), Agriculture, Currency Wars… and ultimately Interest Rates. The events of 2020 have powerfully validated that ongoing analysis!
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.