Rising Treasury rates, and my 3 best sectors to be watching! When will the Bulls be back??
Crypto Updates and a crisis proof investing plan.
Welcome back! 👋
Time for another week in review; a lot’s happened in the past week or so in the world 🌎 of money. Let me catch you up on what the heck’s happened.
Rising Treasury rates remain 📈
We all know how volatile the stock market’s been lately and with no clear path for whats next we need to hunker down and find the nuggets for our portfolios and keep DCAing our way back into the next bull market. There is a reason why the markets have been volatile that you may or may not have known…
US Treasury Rates are at a ridiculous high, guys. Now if you don’t know what I’m talking about, then read on!
The government obviously needs capital to fund projects that affect our day-to-day - like roads, factories, stuff like that. Well just like its citizens, America loves borrowing money to get what it needs! So the US sells off bonds (or Treasury bills) to people like us to fund these projects. You know I like T-Bills during these times.
When you own them, you get paid interest. You can get one as short as a year or as far out as 30 years. Keep in mind the longer you own them, the more you profit over time. A treasury rate (or yield) is the annual interest people who own these “T-bills” get paid. Now keep in mind that these are usually “safer” bets, as they’re backed by our government.
It’s basically a signal of how well our economy is performing, especially the stock market and other consumer markets like the housing market.
Source: Bloomberg Finance. Data as of 10/5/2023.
As you can see, over the past 10 years, rates have gone up and down but now they’ve started settling around 4.7%, which means things aren’t looking as good as we’ve hoped (and let me tell you why).
Think it of this way… there’s a see-saw effect with these rates versus how different markets perform. Supply and demand, my friends. When more people want these bonds, the rates go down. And when fewer people do, they go up. Simple, right??
Well, this directly affects our consumer markets like real estate and stocks like crazy!! Higher Treasury rates mean that:
Stocks look less sexy as more investors get a better return on the safer bet in T-bills.
Mortgage rates increase (to a whopping 7.31% at the end of September, which is a 23-year HIGH 😱)
What this all even means
With everything going on, keep these things in mind:
Growth and inflation should slow down a bit: with student loans restarting, a reversal in the housing market, and a possible government shutdown, rates should cool out and even out soon.
Look to invest in longer-term bonds (10+ years): As other markets work hard to stabilize, you need to consider parking some of your money where it’ll grow the fastest (and the safest). If you’re heavily invested in stocks, you may want to consider taking some profits to safeguard your future returns. Diversification is always key - but especially in uncertain markets.
_______________________________________________________
Crisis-proof investing plan
Diversification is essential to building wealth, period!! In all regards, you have to have all your bases loaded to continually build wealth.
“You can never have all your eggs in one basket”, I always say as the market clearly is showing in our current economy. There are 4 factors to true diversification that when done right, ensure you’re secured for any financial “crisis”, I can guarantee you (I’m a living testament)!
Have your hand (and money) in as many things as possible: The seasons aren’t just in nature; they’re prevalent in our economy as well. Don’t by any circumstances put ALL your money into one stock/ETF/investment/etc. You can essentially build your “own fund”, chock-full of various investments. A proper rule for finding your age-appropriate stock percentage is simple! You take 100 and subtract your age. So if you’re 30, holding at least 70% of your portfolio in stocks is ideal. Adjust accordingly with respect to your risk-tolerance.
Have a good amount of “low risk” investments: In times of volatility, getting as many base hits will help you win the game. While stocks have huge upside potential, they’re equally sensitive to reversing and going sideways and even down for periods of time. So safeguarding a sizeable amount of money while eliminating a lot of your high-risk investments is always a solid plan. Index and bond funds work to match the performance of overall market indexes, so longer-term staking is a must.
Never stop building up your portfolio: No matter what amount you start with, you should always be adding “fuel to your fire.” Dollar-cost averaging is a strategy where you invest a set amount of money regularly, no matter the frequency. There’s no set rule. You have a couple of options: daily, weekly, monthly, or quarterly. $100 every week whether the market is up or down has increased over time at an average of 8-10%. Despite what you choose, hold yourself accountable.
Know when to hold AND when to fold em’: Setting routines in place for your investment strategy is a great way to begin building wealth. But another key part of protecting your pockets is knowing when to hold… and when to call it. Market conditions change daily so you have to stay up to date with the latest news about where your money is placed, because “money that isn’t carefully monitored will always find a way to lose itself.” That is why I continually discuss active management over set it and forget it strategies.
“Remember it’s not about TIMING the market, it’s about TIME in the market”
_______________________________________________________
The current (weakest) Bull Market 🐂
Say hello to our current “bull market”, or at least by definition. A bull market is known as a period of growth in the stock market where overall prices have increased by at least 20% since the previous downturn of the market. It’s a natural ebb and flow of stability, where bear markets quickly follow and precede every bull market and visa versa.
Our economy is still recovering from the pandemic’s unforeseen rippling, but there appears to be some optimism for better days - coming soon! When inflation backs down around 2% and interest rates come back down, we can expect some upward momentum in the markets. When will this happen - Many, including myself, think it will be much sooner than the doomsday proclaimers. Remember we are here for the long haul and the markets always go back up.
“The market remains overvalued. While valuations are not good short-term indicators, in the long run, value matters.” said Ned Davis of Ned Davis Research. He talked about how the S&P 500’s price-to-sales ratio hit levels above the 2000 dot-com boom (as you can see below).
Source: Ned Davis Research.
Other factors going into this current market condition are recent economic data, such as the fluctuating job market and T-bill yields that shape the performance of the overall market as well. Stocks are totally overvalued now and are bound to correct themselves eventually, so don’t be surprised when prices come down relatively soon. So if you’re looking for actionable steps from this, do this:
Study the trends of both bull markets AND bear markets as both can be highly profitable if you understand the game behind each one.
Expect drawdowns in stock prices and rebalance your portfolio as time passes. This includes (but not limited to): selling for a loss, buying “at a discount”, etc.
_______________________________________________________
“Uncut Gems” on my radar in the next 3 years 💎
Changing times call for a changing of the guard in what’s “hot” and what’s “not”. Emerging sectors evolve over the years so it’s important that you stay up-to-date with the world we’re in. Like the dot-com boom we talked about earlier, technology stocks became a hot commodity in the late 1990s. Companies like Books-A-Millions and Yahoo! saw all-time highs during this era.
And today stands no different. Here are 3 sectors that you need to keep your eyes on for massive potential in the next 2-5 years.
Cryptocurrency, is one that CAN’T be ignored any longer. While there’s never a “guaranteed” profit, there are clear signs when something is bound to take off 🚀 Bitcoin serves as the backbone for all following digital currencies. It’s heavily swayed by external factors like inflation and interest rates similar to other markets. With an all-time high of over $65,000, experts predict it can come closer to previous highs at around $45,200 within the next 2-3 years. In my opinion and in light of the BlackRock, Fidelity and ARK Investments Bitcoin ETFs on the horizon as well as the Bitcoin halving coming Q1 of 2024 I feel there will be a much more robust price range of $85-$140K. Time will tell!
“Global warming is a huge issue we’re facing, and the increasing atmospheric level of carbon dioxide is one major contributor”, said Alexa Easley, a Klarman Postdoctoral Fellow in chemistry and chemical biology in the College of Arts and Sciences. Carbon emissions are constantly increasing to the continued heating of our planet. Expert scientists have been developing what’s known as carbon capture, or the storage of carbon dioxide (CO₂). The Center for Climate and Energy Solutions is focused on capturing more than 90% of CO₂ emissions from factories and power plants. The ultimate goal is to use the stored gas in more resourceful ways like fuel manufacturing, construction, and oil/gas. Growing demand shows huge upside for growth in the next 3-5 years for ground-level investors in the fields of carbon credits and carbon capture. So keep this at the top of mind when looking for new investment and business development opportunities.
Artificial intelligence, or AI as I always say, will change the world forever (I guarantee it). Its effects are in every sector from financial services to healthcare. We’ve seen it before it was coined and popular. Take a look down at your phone (chances are it’s an iPhone)! Ever used Siri? Congrats - you’ve been using AI since 2010. In the days of ChatGPT and other automation increasing every single day, you’re in an exciting (and highly profitable) time! Tech giants like Microsoft and Google stand to take the lead in defining the role of AI in the next few years in our world. You don’t want to sleep on this sector! So stay on top of the other leaders like Nvidia, Meta, Advanced Micro Devices and even Tesla. And look for others that may not be grabbing the headlines but are still building interesting projects and have huge upside - think Palantir!
_______________________________________________________
Your “strongest” asset to building wealth
Your mindset determines EVERYTHING. I’ve failed and I’ve succeeded - my success wouldn’t exist without an unwavering belief in becoming a better me daily. You can’t outwork or outearn your limited beliefs, so you have to put them to rest so the abundant you can show up fully.
“The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant.”, said Robert Kiyosaki, the author of Rich Dad Poor Dad, one of the most popular financial literacy books around.
_______________________________________________________
Additional resources (w/ links)
Investing made easy: There are tons of apps that you can set and forget - but none have worked as well as these 3 companies have!
Acorns
It’s an absolute must in your wealth-building journey! It’s really easy to set up. You simply add your bank account and choose from a couple of options:
Automatic round-ups where you can choose custom dollar amounts to round up any change remaining from each time you swipe your card!
Custom recurring deposits from your account so you don’t have to lift a finger to build your savings!
Acorns also automatically invests your money based on the rate of risk you choose for your portfolio and they take the money they save for you and make building your wealth a no-brainer!! I’ve officially partnered up with them so click here to start your automatic account today!
Public.com
Say hello to Public.com. I’ve been a fan of them for quite some time now! They’re my go-to whenever I buy crypto and T-bills. But they have more ways to invest and grow your money and I personally recommend them to you. They’ve been cool enough to gift you guys some free stock when you sign up and make your account. So head over there now and enter my code “richhabits” when you tap the link here!
"Important Analysis: SPYI -- Passive Income ETF"
As you all know, I'm always on the lookout for analysis and commentary on new investment ideas. A few months ago, my podcast co-host Austin Hankwitz shared this deep dive on our favorite passive income ETF, SPYI.
SPYI has an annual distribution yield of 12%
SPYI pays their investors on a monthly basis
SPYI leverages Section 1256 contracts for tax-efficient income
Be sure to read the analysis here!"
As always, continued success on your financial journey! Until next time!