Wealth Watch: Bonds in a Rough Spot, Look to Growth To Beat Inflation

Wealth Watch: Bonds in a Rough Spot, Look to Growth To Beat Inflation

April 08, 2022

From the desk of Vance Howard:

The HCM-BuyLine® is positive, and we are buying on pullbacks. As you can see from the chart below, the market is in a trading range, and the pullback we are seeing now is a normal reset after the move higher last week. We feel the odds are very high that the low of the year was set in February, but volatility will be the norm for the next few months. We are still holding a lot of cash and deploying at a measured pace. There does not seem to be a compelling reason to rush back in, so plan to buy on pullbacks and be nimble.

Bonds are in the tank, with TLT, the ETF of the 20-year Treasury bond now down about -13% YTD. The only bonds we own currently are some convertibles and 1-3 month T-bills, which is just a notch above cash. There looks to be nothing but pain in the bond market for some time to come.

This morning Ron Baron made a statement I fully agreement with, which was buy growth stocks to fight inflation. If inflation is at 7%, you need to average about 15%+, and growth stocks have been a great place to do that. Our goal with our growth mutual fund and ETFs is to double our money every 4-6 years.  To do that, you have to accept a bit more volatility in the short term to capture the bigger returns down the road.

Vance Howard

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