While history does not always repeat, prudent investors should still be students of it. Something has happened now that should be understood in the right light.
When it happened last, many investors lost about half the value of their portfolio. It was a common joke that 401(k)s had become 201(k)s. Let’s explore the issue with the help of two charts.
Please click here for a chart showing the yield curve.
Please click here for an annotated chart of S&P 500 ETF SPY, +1.56%. Even though many investors focus on the Dow Jones Industrial Average DJIA, +1.44%, it is better to use the S&P 500 or Nasdaq 100 ETF QQQ, +2.19%. For the sake of transparency, this is the same chart that was previously published without any changes.
Note the following:
• The white vertical areas in the first chart show recessions.
• During the last recession shown on the first chart, most investors lost about half of the value of their portfolios.
• The first chart shows that the yield curve has fallen to the lowest level since the last recession.
• The first chart shows that the fall in the yield curve has been followed by a recession.
• The second chart shows that The Arora Report gave four signals before the drop in the stock market.
• The four signals include short-selling Nasdaq 100 ETF or buying leveraged inverse Nasdaq 100 ETF SQQQ, -6.57%, which goes up when the market goes down; increasing hedges to protect portfolios; taking profits on select ETF positions in our ZYX Global portfolio; and taking profits on China ETF ASHR, +3.46% in our ZYX Emerging portfolio.
• Please click here for an intraday chart of S&P 500 ETF, which was published when the stock market was staging a strong rally. For