Current Economic Environment 27 Dec 2024
Graphic is courtesy of http://Stockcharts.com
The market always looks ahead. Prices for today are usually expectations of the future. A way of measuring different priced markets is to look at their performance over some recent period of time. Many people look at past price performance looking back even to a year in the past. My understanding is the market generally looks 6 to 9 months to the future so I like to use a 6 month look back period. I will look at the market price performance for the past 6 months and use that to compare how different investments are performing relative to each other.
The investments in the graph above show gold, stocks, global stocks, long term government bonds, and short term government bonds. Gold generally performs well during times of inflation and has increased over 12% in value during the last six months. The stock market generally performs well when the economy is growing and has returned over 10% the last 10 months. This tells me we have economic growth in an inflationary environment. Notice how long term government bonds have a negative return over the past 6 months. Long term bonds are adversely impacted by inflation due to inflation reducing their fixed value.