Original title: "suffering Index" heralds the trend of gold and US stocks: one will go up, the other will go down
Stuart Allsopp Follow, a former head of financial markets at Fitch Solutions with 15 years of experience in global market analysis, said:
According to the suffering index, inflation and unemployment are rising, but the S & P 500 remains at a multi-year high against gold. This is very similar to the precursors of previous recessions in the United States, so I expect the history of the Great Depression to repeat itself. "
What is the pain index?
The suffering index, which is the sum of inflation and unemployment, has historically followed the price of American stocks and gold.The ratio of lattice is highly related. The pain index is calculated by adding the inflation rate to the seasonally adjusted unemployment rate to produce an indicator of the degree of stagflation in the economy.
Compared to the S & P 500 indexHigh inflation and high unemployment are good for gold prices.
The chart below shows the correlation between the pain index and the S & P 500 / gold ratio, dating back to the 1950s.
The current S & P 500 / gold ratio is nearly twice what people expected. Stuart Allsopp Follow says:
"We also saw such a big difference between the two indices in the data of 1971, 1975 and 2000, much higher than the 'reasonable' level of the pain index."
The chart below shows the overvaluation of the S & P 500 / gold ratio relative to the pain index and the annual return ratio over the next 10 years.
Stuart Allsopp Follow says that the relationship between stocks and gold ratios is a tool that is often used to make investment decisions. By studying trends, he found a conclusion:
"there is a lot of evidence that US stocks will lose money in the long run relative to precious metals, especially if the pain index is likely to continue to rise. The only good news is that I expect gold to perform very well. "
In addition, analysts expect the United States to continue to pursue loose policy. One of the previous assumptions of the policy was that there was an inverse relationship between inflation and unemployment. That is, if unemployment is high, it reflects economic weakness, which can be reduced by loose monetary policy, but at the cost of rising inflation.
Analysts believe that based on the current performance of the US government, it seems highly likely that increasingly aggressive monetary and fiscal policy will continue before more bad news, such as further worsening inflation.But this could be a ticking time bomb that could be detonated at any time.
It is worth mentioning that Wells Fargo Securities recently warned that the day of liquidation of technology stocks is expected to come soon, and US stocks are expected to fall 12%, urging investors to take profits.