With the July numbers in the books, let's jump right into the charts!
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Longtermtrends
With the July numbers in the books, let's jump right into the charts!

Let's start by looking at the Yield Curve. Long-term yields for US Treasury bonds fell while short-term yields rose. Whereas the 10y/2y spread already inverted in March, the 10y/3m finally followed suit this week. According to Jurrien Timmer, the FED has less control over the 2-year yield than over the 3-month yield, and since it anchored short-term rates close to zero for a long time, the 10y/3m only inverted very recently.
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The 10y/3m inversion came after the FED hiked the federal funds rate by three-quarters of a percentage point on July 27th in an effort to combat inflation, which currently stands at 9.06%. Inflation rose after the M2 Money supply increased by over 40% in 2020 and 2021, which was driven by government spending to stimulate the economy during the COVID-19 recession.
With the latest CPI print, the real interest rate stands at -6.04%. The real yield for a 10-year Treasury bond fell along with nominal yields, which was supportive for Gold prices. Gold outperformed Silver, leading the he Gold/Silver Ratio higher, which rose along with the US Dollar Index.
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Credit spreads for high-risk bonds remained relatively low - except for mortgages, for which they rose to 2.54% and got close to the 2020 and 2008 highs. With the average rate for a 30-year fixed mortgage reaching 5.3%, Home prices in the US finally experienced a bit of a correction after a decade of making new highs.
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With rising inflation, commodity prices soared, leading the Stocks to Commodities Ratio lower - potentially signalling a regime change from a deflationary cycle to an inflationary one.
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Let's take a look at different valuation metrics for the US stock market. Stocks still look expensive relative to GDP, relative to real estate, relative to bonds, and relative to 10-year earnings.
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Internationally, US stocks put in a new high vs. the (aggregate) rest of the world, while Emerging Markets moved lower.
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Let's look at different segments within the US stock market. With falling long-term yields, Growth stocks outperformed Value stocks and the Nasdaq outperformed the S&P 500.
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Finally, looking at sectors, over the past 3 years the Energy sector outperformed the rest of the market, while Communication Services (which includes Facebook and Netflix) underperformed.
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This month's newsletter is sponsored by Cambria Funds. Are you searching for a strategy that goes beyond dividends? Cambria’s Shareholder Yield ETFs combine dividends, buybacks, and debt paydown to offer a more holistic approach to yield investing, often referred to as “shareholder yield.” Read about the US-focused SYLD here. Read about the foreign-developed focused FYLD and foreign emerging-focused EYLD here. Always read the prospectus before investing: SYLDFYLDEYLD.

Do you have different interpretations to the charts or do you have ideas on how to improve Longtermtrends.net? - I'd love to hear them! Feel free to reply to this email or to contact me on Twitter.

Thanks for reading and have a nice day!
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