How Bond Rates, Electric Vehicles, Bitcoin, And Tulips Will Affect Your Dividends

I spend my day reading financial news, and usually I have my TV tuned to one of the business networks in the background. I have been in and around the financial world formore than 30 years. I wake every day and tell myself: “We live in very interesting times.” One of the things making them so interesting is trying to ferret out whether the laws of economics, as I learned them, still apply.

When investing or trading, the big dilemma comes from the challenge of what you think/believe should happen in the markets versus where the markets actually go. Just because you have a strong belief, either from study or from hope, and your investments make money, that does not mean your expectations will come true.

For editorial use only tulip field

To be successful, investors must be ready to adjust their beliefs and expectations based on what the markets give them. Here are some examples.

By many historical yardsticks, the U.S. stock market could be viewed as highly overvalued and due for a correction, or even an actual bear market. A lot of my subscribers write about their expectations for a coming stock market pullback. But even though there are plenty of signals that would seem to support their beliefs, the stock market may continue to go up for months and months. The biggest positive for stocks is that they are one of the two only games in town for investors.

History shows us that pumping trillions of new money (okay, never before has it been trillions of dollars) into the economy should lead to inflation and higher interest rates. I just saw this note from interest rate expert Mark Grant: “Spain just issued 30-year bonds at 118 basis points lower than the markets will lend to the U.S. Treasury.” Spain should not be able to borrow for less than the U.S. government. I am concerned that the financial markets will not be able to absorb all the U.S. government’s new debt, which will quickly push interest rates higher.

On the other side, the Federal Reserve will do everything it can to keep down rates. Who will win: the Fed with its near-infinite power, or the markets, which also have near-infinite power?

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Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

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