“Steve, how can you even think that long-term interest rates could possibly go LOWER?” you might be asking…
“Don’t you know? EVERYONE believes interest rates are headed higher.”
You are right… EVERYONE believes interest rates are headed higher.
The thing is, the fact that EVERYONE is already in this trade is the reason why interest rates will struggle in the next three months or less…
The evidence is stacking up everywhere that we are at an extreme in interest rates right now. EVERYONE believes that long-term interest rates are headed higher…
Let me share a few examples:
- According to the latest Global Fund Manager Survey from Bank of America, fund managers are so scared of higher interest rates, they are avoiding bonds to the greatest degree in the decades-long history of the survey. (Fund managers are more “underweight” bonds than ever.)
- “Inflation and a bond crash” is what worries fund managers the most, according to the same survey.
- Traders have placed their second-largest bets in decades on higher interest rates (based on trading in the futures markets for 10-year government bonds).
The last time futures traders placed so many bets on higher interest rates was early last year.
What happened next? Interest rates on 10-year U.S. Treasury notes went DOWN – from 2.6% in March to 2.15% in June.
It doesn’t matter what the investment is – whenever you see EVERYONE betting the same direction on a trade, that trade is typically almost over.
Bond investors are betting on higher interest rates to a near-unprecedented degree.
I expect – over the next three months – they will be wrong in that bet.
I’m not betting against them because of their reasons. I’m betting against them because no one is left to join their argument…
Everyone who wants to bet on higher rates has done so. That means nobody is left to join the trade and push rates higher.
Now, I don’t have a trade in place – yet. I’m waiting for the trend in interest rates to start falling.
Once the trend is here, I’ll likely place a three-month bet that long-term interest rates will go DOWN.
Are you bold enough to go against EVERYONE and do the same?
If I’m right, and interest rates go down, it could fuel another leg up in stock prices. And what I’ve called the “Melt Up” in stocks could explode even higher.
Stay on board with stocks…
SteveYour One-Step Inflation Survival Guide [sponsor]
With accelerating inflation and declining stocks, you likely need a different investing approach. A 20-year market veteran shares an easy one-step plan, including details on his No. 1 GOLD recommendation today, right here.
Source: Daily Wealth