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We have written about how we believe there are essentially only two things you need to know when you buy or trade bonds – inflation and economic growth. We have explained the inflation proxy (oil + the Auzzy dollar) and the economic proxy – the S&P 500. Let’s now look at how these two factors affect returns individually and where we stand as of today in each case. We’ll start with the S&P. It is a reasonable assumption that if the economy is growing well then the S&P will be rising and that is bad for bonds ...
Gauging Fear to Fuel Superior Returns
We measure the key variables that have historically sparked good returns in stocks and bonds. Once we know where they stand we can skew risk/reward in our favor.
There are only a few things we need to know to determine when there is good money to be made in stocks and bonds:
It’s that simple. Paratrade’s fuel gauges boil these factors down to two simple indices for each market – one is daily and the other is weekly. There are also two such gauges for the “risk parity” position where you are long both stocks and bonds.
We can study the historical performance of the market when the fuel gauges are at varying levels. The table at my site shows filtered S&P and bond returns for different ranges of the indices. There is a clear skew.
By subscribing to Paratrade’s daily commentary, you will receive an update about where these indices stand. Can you afford not to know?
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