Gold Bear Markets Since 1942: Chart

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Gold prices closed at XX$/oz yesterday. Since late 2012 gold prices have been on a slow decline although they have recovered some since last year.Despite the recovery prices are nowhere near $2000/0z that some expert predicted at the peak of the gold bull market.

In the past gold has had brutal price plunges during bear markets. For instance, from 1996 to late 2000 prices fell over 70%. The following chart shows the historical gold bear markets since 1942 using the Barron’s Gold Mining Index (BGMI):

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Source: In Gold We Trust, Incrementum

Download:  In Gold We Trust 2017 report (in pdf format)

Related ETF:

  • SPDR Gold Shares Trust(GLD)

Disclosure: No positions

 

Morgan Stanley: India’s Sensex Can Reach 34,000 In One Year

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The Indian equity market is one of the best performing markets so far this year. The benchmark S&P BSE Sensex is up by over 17% year-to-date. Despite the strong gains, Morgan Stanley’s Jonathan Garner, the chief Asia and emerging markets equity strategist predicts the index may reach 34,000 by June, 2018 according to an article in Lievemint. From the article:

Where do Indian markets go from here? Up another 9%, says Jonathan Garner, the chief Asia and emerging markets equity strategist at Morgan Stanley.

The investment bank has set a Sensex target of 34,000 for June 2018. Garner cited an upbeat corporate earnings outlook and strong economic growth as reasons for the prediction.

On Tuesday, the benchmark 30-stock Sensex closed at 31,190.6 points, 0.38% lower than the previous close. The gauge has climbed 17.1% since January, trailing only the broader Nifty and Hong Kong’s Hang Seng index.

“We are bullish on the Indian market, In fact, we are overweight India relative to our coverage,” Garner said in a phone interview with Mint. “If you look at the situation for equities globally, it is characterized by very strong earnings growth.”

Garner said he expected the Sensex to deliver 18% earnings growth for fiscal year 2018 on the back of likely synchronized upswings in the infrastructure and consumption sector in India.

“(There is) increasing support from exports, while global trade growth is recovering. We also think corporate capex spending will be rising globally,” he added.

Source: Sensex seen scaling 34,000 in a year’s time, Livemint

Though the Indian economy is in a sweet spot among major emerging markets, global investors may have to a little cautious on Indian equities especially after the double digit growth so far this year.

Related ETFs:

  • WisdomTree India Earnings (EPI)
  • iShares S&P India Nifty 50 Index (INDY)
  • PowerShares India (PIN)

Disclosure: No positions

The UK Stock Market Has Performed Well Under Conservatives Than Labour

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The UK general election is scheduled to take place tomorrow (8 June 2017). After the surprising Brexit vote last year this will be the major political event in the country. British stocks have performed well in the past under conservative leadership than labour according to an article I came across recently.

The following chart shows the growth of 1,000 British Pounds since 1970:

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Source: Where to invest your cash after the election, This is Money

A £1,000 invested in the UK stock market in 1970 would now be worth £232,000 now. That is a return any long-term investor would love to earn. However such returns may not be attainable in the future. During Thatcher’s rule much of the British public services were privatized and financial regulations overhauled leading to soaring stock prices.

From the article:

‘Since 1970, stocks have performed better under Conservative governments than under Labour, though share prices have been driven by global market forces rather than domestic politics,’ said Laith Khalaf, senior analyst at Hargreaves Lansdown.

‘Irrespective of who has been in power, the stock market has by and large risen regardless, posting positive performance during ten of the last 12 governments.’

From an investment standpoint the above chart shows that British stocks perform well in the long-term.

Related ETF:

  • iShares MSCI United Kingdom Index (EWU)

Disclosure: No positions

Why Diversification is Important for Long-Term Investment Success

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One of the simplest and easiest strategies to be successful in equity investing is to diversify. Diversification involves spreading one’s portfolio between various asset types such as stocks,bonds, gold, etc. Within an asset class it is important to hold many types of that asset. For stocks, one can hold US stocks, foreign stocks, small cap, mid-cap, large-cap, etc.

Diversification is highly important because no single asset class has been the top performer every year. I have written about this using Callan Charts below. In the following charts from Fidelity International, we see why the benefits of diversification cannot be under estimated.

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Source: Top investment performers of the past two decades revealed, This is Money

Related ETFs:

  • iShares MSCI United Kingdom Index (EWU)
  • SPDR S&P 500 ETF (SPY)
  • iShares MSCI Emerging Markets ETF (EEM)
  • iShares MSCI Emerging Markets ETF (EEM)
  • Vanguard MSCI Emerging Markets ETF (VWO)
  • Vanguard Total Bond Market ETF (BND)

Disclosure: No Positions

The Current Bull Market in Gold Could Continue: Incrementum

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Gold prices closed at $1,280.20 per ounce for August 2017 delivery in New York on Friday. Gold is currently in a bull market that started last year. In the past 5 years though gold has lost 21% according to Kitco. Since 2000, gold has returned over 344% based on prices in US dollars.

5-Year Gold Price Chart

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Source: Kitco

One of the questions on gold investors’ mind may be how long the current bull market in gold will continue?  As an asset class, gold prices are volatile and the prices move on a variety of factors including demand in Asian countries like China and India, crashes in equity markets, etc. In a report released last week Liechtenstein-based Incrementum stated that the current bull market could continue when compared with past bull markets.From the In Gold We Trust report:

If one looks at all bull markets in the Barron’s Gold Mining Index (BGMI)13, one notices that the current uptrend is still relatively modest in terms of duration and performance compared to its predecessors. Should we really be on the cusp of a pronounced uptrend in the sector – which we assume to be the case – quite a bit of upside potential would remain.

Click to enlarge

Source: In Gold We Trust, Incrementum

Hat Tip: Frank Holmes @ US Funds

Download:  In Gold We Trust 2017 report (in pdf format)

Related ETF:

  • SPDR Gold Shares Trust(GLD)

Disclosure: No positions