The US stock market bull run has not yet ended and it won’t for some time to come, according to gun Stansberry Research Analyst, Dr Steve Sjuggerud.
To prove this, Dr Sjuggerud studied 3 important factors.
Looking back at 40 years of historical data and analysing previous “melt downs” or turning points, Dr Sjuggerud determined that, before most market turning points, the riskiest high beta stocks, which are often found in the Nasdaq, tend to significantly outperform the old world industrial stocks, like those found in the Dow Industrial Average.
According to his study, the Nasdaq would often rise phenomenal amounts while the Dow would often decrease or remain constant in the final phase of the rally.
Take a look at what happened last time the US was in the final phase of its famous dot.com bull market of the late 90’s.
But according to his study of the Dow and Nasdaq over the past 6 months, that hasn’t yet happened. Take a look…
In fact the Dow has actually outperformed it’s technology peers in the Nasdaq!!
Dr Sjuggerud’s second warning sign of an impending market turning point is interest rates. As per the chart below, when short term interest rates become higher than long term interest rates, look out!
Using the above chart, Dr Sjuggerud explains that… every stock market crash in the last 30 years has been caused by the Federal Reserve raising interest rates to the point that short term rates became more expensive than long term rates.
One final method used by Dr Sjuggerud to measure and assess when the commencement of the next bear market might start is by subtracting the 2-year treasury bond rate from the 10-year treasury bond rate. Whenever this measure registered a negative reading, the market was on borrowed time. Take a look below…
But the good news is… based on current rates… we’ve still got plenty of time to make money out of this bull market yet!
According to his analysis of the likely trend higher in interest rates, we might still be as far away as 2 to 3 years before we see the conditions which typically precede a market crash, possibly in 2019 or even 2020.
But as the chart below shows, we should be aware that, as the global economy recovers, and the Fed continues its move to normalise US interest rates, the clock is now ticking.
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The information contained in this article is General in nature and has been prepared without taking into account your objectives, financial situation and needs. When assessing any investment you should also consider that past performance is not a reliable indicator of future performance.