They say that “bull markets climb a wall of worry.” The idea is that you need investors to be pessimistic about the future to create a buying opportunity. As optimism gradually takes over, stocks steadily soar.
The old adage has certainly been true during my career. The best time to buy stocks was when everyone panicked in 2008. Or when we were all about to die in 2020. Not to mention Trump’s tariff tantrum back in April.
The theory also sounds nice and plausible. But what does it tell us about today?
Well, I’ve never seen such doom and gloom during such a stock market boom.
While markets keep hitting record highs, forecasts are growing downright miserable. There are crises lurking everywhere. But stocks are hardly cheap.
What are you supposed to do? Join the bull run in the hope the panic fades? Or panic?
Admittedly, the cynics are right about the miserable state of things…
Plenty to worry about
Monetary policy remains tight relative to the last 15 years. The US housing sector is especially miserable about it. And it tends to lead the economy, due to the wealth effect.
Government bond yields are hitting lifetime highs in all sorts of countries, depending on how old you are.
Governments are openly competing for who will need an IMF bailout first.
While the “experts” warn the UK faces the humiliation, France’s own finance minister is warning his government might have to make the request too.
The UK may be paying the “moron premium” in the bond market at the moment. But can you imagine the pound of fiscal flesh which Portugal, Italy and Greece would demand from France in exchange for a bailout after they were blead dry in 2015?
What a time for populists to be topping the polls in Europe’s largest economies. Who knows what policies they’d implement if they controlled the EU as well as their governments?
I’m most worried about Japan though. The bond market is plunging in price, drying up in terms of volume, and getting a regular bailout from the Bank of Japan already.
But the BoJ’s assistance may be on borrowed time. In a truly astonishing piece of news, inflation in Japan surpassed the US in July!
Not that inflation dropped to the target rate range before central banks around the world began cutting rates. Could inflation return?
The US stock market is at nose-bleed valuations. Meaning investors are paying premium prices per dollar of company profits. Even if future profits are as rosy as expected, prices could still crash.
Energy shortages and blackouts threaten to undermine the part of the stock market that has been booming: Artificial Intelligence.
Electricity prices are rocketing all over the world too. And politicians can no longer blame gas prices for the bill shock. What if everyone wakes up to the real cause?
New Zealand and Canada have proven that housing bubbles really do pop. Is Australia next?
Trump is violating the sanctity of central bank independence. Didn’t we learn the hard way what this means for financial stability?
Trump tariffs weren’t just a negotiating tactic to secure better trade deals. His tax on trade is sticking around. It’ll cause economic turmoil on both sides of borders, for worse.
Demographics are miserable across the Western world. The only thing worse is high immigration. But if right-wing politicians get their way, what’ll happen to GDP growth? And debt to GDP ratios?
With so much bad news, it’s no wonder investors feel like…
Investing is a game of least-bad options
I’d like to tell you something rather awkward. There’s a vast chasm between you and me. I write about investments that will profit from the predictions I make. Or alert you to what’s doomed to crash.
You have to actually allocate your capital as a whole. Meaning your overall portfolio must make sense and be coherent as a group.
Some of my colleagues have been busy solving this problem. Their newsletters have more of a wholesome approach. A portfolio of stocks that make sense as a bundle.
This is a very difficult thing to do. You have to consider correlations and covariances, for example. And learn the stock market meaning behind all sorts of Greek letters used by academics.
But that approach feels a bit painful right now. We do still pick some stocks that we think will boom. But investing feels a bit like a game of least-bad options right now. About avoiding the future disaster zones.
This is a promising mindset, by the way. Buying what’s beaten down, under the radar and undervalued works well. US healthcare stocks, for example, are primed for gains purely because of how badly they’ve performed in recent years.
But it’s hard to get excited about these sorts of things.
The good news is…
One sector is about to go bonanza
The best investments outperform thanks to a confluence of trends. But writing about how many different forces will combine together is notoriously difficult. And reading such pieces is even harder.
The two small modular reactor stocks I recommended in the past are both up hundreds of percent because several different things happened at once.
The AI data centre boom created vast energy demand. The green bubble burst. Nuclear power became popular again. And there is a shortage of electricity.
I covered each of these issues in detail in my writing. But over the course of several different research reports.
Well, today we are presented with another opportunity to profit from a confluence of trends. And, this time, you can read the case for investing in one place.
Our in-house geologist reckons four forces are converging on part of the resources sector. Individually, they’re a buy signal. Together they’re a very rare opportunity indeed.
And if the old adage is right about bull markets climbing a wall of worry, now is a great time to deploy some more capital – while others are fearful.
So, check out what the four forces are, and how to adjust your portfolio for them, here.
Regards,
Nick Hubble,
Strategic Intelligence Australia
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