Big-Picture first: The Bullish View

The big reason to be bullish is pretty simple. Currently we are in a secular (long-term) bull market. Yes, there are always pushes and shoves both down and up, but betting against the bulls in a long-term up market has been a losing proposition. The trade war didn’t derail this current bull market, neither did the pandemic. If we have a problem today, it is rising Treasury yields sitting alongside rising prices in some handfuls of basic materials, energy and some consumer goods. Our problem du jour – if we have one – is inflation. Or, perhaps, the fear of inflation. Nevertheless, as I said: a bet against the bulls has been a losing bet in an ‘up’ market and that, dear friends, IS what we have.

Here’s our chart for today.  Secular bull markets historically are long-term. They move up and down a lot and there is no perfect method for timing the markets. But have a look at the market gyrations over the past 100 years. Note the market since the start of the current bull run (about 2012). The charts suggest you ignore the naysayers.

The big deals of the day: The trade war and pandemic are merely blips on this wildly bullish chart. History suggests that asset class rotation is still in the early stages. Scary stuff will happen.  There will be times when we must pause and breathe deeply. However, history says hang in there. So that’s the long-term picture.

On a shorter scale, June is typically not a very kind month to investors. As things begin to slow, we might be wise to trim our expectations, at least for the near term. Early June and mid-June have usually been good, with bouts of weaker returns in between. But with prices printing new highs for the indexes, it’s hard to be a market Bear.

On the other hand (remember our resident two-handed economist) the recent spikes in inflation tend to be hard on technology stocks. The month of June has shown that tech stocks in June only beat the overall market about 1 year of every four.

And so, we typically exercise a bit of caution in June. The third calendar month of each quarter tends to lag a bit. And though anything COULD happen, without a strong tech sector it becomes harder for the big one (the S&P Index*) to gain much ground. Remember the technology stocks make up about a fourth of the Index.

We will continue to search for the sectors that are showing more strength than the overall market, and from time to time we’ll likely gasp or hold our breath. That said, there’s a lot of year left, and as I’ve said before, we expect this to be an overall positive year.

Ron’s Market Minute — Bitcoin Is Still with Us

In recent months I’ve answered quite a few client questions about cryptocurrencies in general and Bitcoin in particular. So far, we can summarize my feelings by saying that whatever it might eventually be, its time is not yet here. So…

Will Bitcoin Ever Become a Major Currency?

Many Bitcoin promoters talk about the eye-popping price of Bitcoin and use that data as confirmation that it is becoming accepted and will soon take over from the dollar as the world’s preferred currency. So let me again give you a couple things to think about.

 To be a major currency, something must provide ease of transferability and wide acceptance. More important, it must be stable enough to be regarded as something that can be used to store value. The strongest currencies are from countries with these three characteristics: (1) Stable politics (Yes, our politics may seem crazy at times, but U.S. politics are really quite tame compared to most places), (2) a strong economy, and (3) a strong military.

 Other countries may challenge the U.S. on one or two of those points, but no country outdoes the U.S. in all three – which is why the dollar is the preferred currency around the world.

 Bitcoin, is accepted by very few vendors, despite the purported ease of use. Strike one.

 Bitcoin “miners” verify transactions as legitimate, but they are very inefficient in doing so, often taking 15 minutes or more. Imagine waiting that long in line at the grocery store for your Bitcoin payment to be accepted and you will see a structural impediment to Bitcoin’s acceptance.  I don’t think so! Strike two.

 Bitcoin’s structure limits the world to a maximum of 21 million Bitcoins in existence. Promoters of the crypto currency say this will prevent inflation since no more can be created. However, as economies grow, currency in circulation needs to grow too. An economy growing at 3% per year needs 3% more currency each year or payment bottlenecks will occur. This inelasticity of supply is the main reason the world went off the gold standard 50 years ago. For this same reason, Bitcoin will have trouble as a worldwide currency. Strike three.

 So, Bitcoin strikes out as a currency, leaving it as just a (very!) speculative asset.


 Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

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Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Mr. Denk is also an Advisory Representative offering services through Denk Strategic Wealth Partners, a Registered Investment Advisor. Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation.

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