I recently exited my gold and emerging market bond positions after they broke below my defined “line in the sand.” Successful portfolio management ultimately comes down to risk management—and the discipline to act when sell signals are triggered.
As a rule-based trend follower managing IRA accounts since 1990, I don’t force investments when trends lack clarity. When conviction is low, I’m comfortable holding cash and waiting for the next high-probability opportunity—whether the trend is up or down.
If we are entering a period of stagflation—marked by slowing growth and persistent inflation—I expect downside opportunities to emerge. In that environment, inverse ETFs, which rise as markets fall, may provide a way to generate returns. Near-term direction, however, will likely depend on how quickly geopolitical conflicts resolve.
Treasury yields are rising as markets anticipate increased government spending and debt issuance. With a federal budget exceeding $7 trillion against roughly $4 trillion in tax revenue, deficits continue to expand, adding to an already elevated debt load. Historically, this has led to monetary expansion—but further money creation risks fueling inflation, tightening financial conditions, and slowing growth even more.
If stagflation persists, history suggests the eventual outcome is often recession—sometimes prolonged—to bring inflation back under control. While the Federal Reserve has intervened in past crises, there is no guarantee the same playbook will work without unintended consequences this time.
I’m also closely watching developments in stablecoins—digital assets typically designed to maintain a 1:1 value with reserves such as Treasury securities. A government-backed stablecoin could lower borrowing costs and increase demand for U.S. debt. Stablecoins are an evolving space with long-term implications, and I’m monitoring opportunities like Circle Internet Group (CRCL).
From a technical perspective, both the S&P 500 and Nasdaq-100 remain below their 200-day moving averages—a level I consider a “no-go zone.” Historically, sustained weakness below this trend line signals elevated risk. Junk bonds are trading below their 50-DMA, a sign that investors have lost their risk appetite. Cash is a position!
The U.S. dollar continues to strengthen against other currencies, reinforcing its role in global trade—particularly in oil, which is priced in dollars. Gold typically moves inversely to the dollar, so as the dollar rises, gold tends to weaken. In this environment, countries may sell gold to buy dollars to facilitate energy purchases. Additionally, easing sanctions on Iranian oil could increase supply and help moderate global oil prices.
For now, I’m comfortable holding cash equivalents, such as the PIMCO Enhanced Short Maturity Active ETF (MINT), while waiting for clearer signals. Durable market bottoms are typically marked by capitulation—high-volume selling that exhausts weak hands—followed by a strong, confirmed rally.
Until then, I’m not assuming the Fed will once again rescue markets simply because it has in the past. Protecting capital remains the priority. We will come out and play, so let’s wait for the rain to stop and the sun to shine.
God gives wisdom to the wise and knowledge to those who have understanding. Daniel 2:21