Sell the Trump rally and Buy bonds
All this to say I respectfully disagree with Ray Dalio, Bob Prince and the folks at Bridgewater which is why I recommended investors sell the Trump rally, buy bonds on the recent backup in yields and proceed cautiously on emerging markets as the US dollar strengthens and could wreak a deflationary tsunami in Asia which will find its way back on this side of the Atlantic.
Unlike Ray Dalio and others, I just don't see the end of the bond bull market and I'm convinced we have not seen the secular low in long bond yields as global deflation risks are not fading, they are gathering steam and if Trump's administration isn't careful, deflation will hit America too.
This is why I continue to be long the greenback and would take profits or even short emerging market (EEM), Chinese (FXI), Metal & Mining (XME) and Energy (XLE) shares on any strength. And despite huge volatility, I remain long biotech shares (IBB and equally weighted XBI) and keep finding gems in this sector by examining closely the holdings of top biotech funds.
And in a deflationary, ZIRP & NIRP world, I still maintain nominal bonds (TLT), not gold, will remain the ultimate diversifier and Financials (XLF) will struggle for a long time if a debt deflation cycle hits the world (ultra low or negative rates for years aren't good for financials).
As far as Ultilities (XLU), REITs (IYR), Consumer Staples (XLP), and other dividend plays (DVY), they have gotten hit lately partly because of a backup in yields but also because they ran up too much as everyone chased yield (might be a good buy now but be careful, high dividend doesn't mean less risk!). Interestingly, however, high yield credit (HYG) continues to perform well which bodes well for risk assets.
Unlike Ray Dalio and others, I just don't see the end of the bond bull market and I'm convinced we have not seen the secular low in long bond yields as global deflation risks are not fading, they are gathering steam and if Trump's administration isn't careful, deflation will hit America too.
This is why I continue to be long the greenback and would take profits or even short emerging market (EEM), Chinese (FXI), Metal & Mining (XME) and Energy (XLE) shares on any strength. And despite huge volatility, I remain long biotech shares (IBB and equally weighted XBI) and keep finding gems in this sector by examining closely the holdings of top biotech funds.
And in a deflationary, ZIRP & NIRP world, I still maintain nominal bonds (TLT), not gold, will remain the ultimate diversifier and Financials (XLF) will struggle for a long time if a debt deflation cycle hits the world (ultra low or negative rates for years aren't good for financials).
As far as Ultilities (XLU), REITs (IYR), Consumer Staples (XLP), and other dividend plays (DVY), they have gotten hit lately partly because of a backup in yields but also because they ran up too much as everyone chased yield (might be a good buy now but be careful, high dividend doesn't mean less risk!). Interestingly, however, high yield credit (HYG) continues to perform well which bodes well for risk assets.
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