Yesterday, bond yields soared to levels not seen in a decade.
And it has nothing to do with either the Fed or the European Central Bank.
There was no speech by either the Fed’s Jerome Powell or Christine Lagarde, the president of the ECB.
The dramatic yield spikes were caused by bond traders.
And here’s the thing…
I would usually pay more attention to what investors do than to what a lot of self-appointed experts say.
And what’s going on in the bond market tells me one thing… the 18.6-year real estate cycle is alive and well.
Let me explain…
Why Have Yields Soared?
Bond yields rise when investors sell their shares. Lower prices mean higher yields.
And there was quite a bit of selling…
Investors absorbed the news that private sector employers were hiring at a slower-than-expected pace… in fact, it was the slowest pace in over two years.
This feeds the “economy is cooling” narrative. Weak employment data suggested that the economy is slowing down, which means that inflation could decrease, and that, in turn, means that the Fed isn’t going to hike interest rates as aggressively as it did in the past.
In the meantime, investors are getting used to the “higher for longer” narrative. Interest rates may not fall as fast and as soon as investors expect. And high interest rates in the future are bad for bonds now, or at least the market thinks.
Here’s My Take
I have been following the 18.6-year real estate cycle for decades. Even though interest rates are important for the value of land and real estate… they aren’t the defining factor.
Where we are in the cycle is more important than what the prevailing interest rates are.
This is why I don’t make any long-term conclusions based on the bond market chaos.
It pays to observe the market, yes. But I do it to look for opportunities, and they usually lie outside the mainstream conversation.
Earlier this year, when interest rates were rising, I recommended a housing stock to subscribers of my premium newsletter, The Signal.
Within three months, we scored a 52% gain on that recommendation.
Right now, as I see bond investors panic, I’m reminded of that situation.
The market is afraid, which means it’s a good time to make another bullish move.
Unless you’re overweight long-term Treasuries (which you shouldn’t be anyway; that’s what institutions do), this mini-crisis may present you with buying opportunities that will prosper as we enter the “Eleventh Hour” of the 18.6-year real estate cycle.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
P.S. The Eleventh Hour is the time in the markets a few years before a real estate-led crash that can make or break your wealth.
It’s marked by a huge run up in the stock market… and I believe now is the best time to get into the right stocks…
We do this by reading specific chart patterns and timing clues.
I get into specifics in my briefing about this 223-year-old phenomenon right here, including which stocks you should get into now.
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