Buy or Sell? The Only Number That Matters

|September 25, 2021
Modern stock exchange

Did you get scared by the market drop on Monday? Did you then worry you missed the big surge on Thursday?

It was a whirlwind week for the markets… or so the headlines would have you believe.

Yes, the markets fell on Monday. But while the headlines were screaming bloody murder, we saw a drop of less than 2% – far from a “plummet,” as one outlet described it. And well within the bounds of this market.

S&P 500 - Year to Date

Considering the market is still within 5% of its all-time high, things were nowhere near as dire as the headline writers wanted us to believe.

The markets brushed off the blip and made it back to breakeven for the week by Thursday. Or “roared back,” as another outlet reported.

The headlines this week were another reminder that the more sensationalized a story is, the better it sells. Reality – and rational thought – be damned.

That’s why Andy had an important message for his Manward Letter subscribers this week… one we wanted to share with all his readers.

His message is simple. Forget everything you hear and read… and focus on one simple but crucial number.

Watch This Number

“Don’t look at the main indexes – the Dow, the S&P 500 and the Nasdaq. They don’t mean anything. They certainly don’t speak to valuations,” he wrote.

Instead, focus on interest rates.

And there’s only one number you need, according to Andy…

Simply watch the 10-year Treasury.

It dipped by a mere six basis points [on Monday]. At its low for the session, it briefly hit 1.29%. It quickly rebounded… taking stocks with it.

Right now (and this changes monthly, if not weekly), the critical number for stocks, bonds and even crypto is 1.30%. Any number below that means the market is oversold and is an incredible buy.

Any number above that figure means we need to pick our plays wisely.

What comes next – and where that key figure goes next – is largely up to the Federal Reserve. 

At the Fed meeting this week, Jay Powell told us that “policy will remain accommodative until we have reached” the central bank’s goals on employment and inflation.

That means stocks and cryptos will continue to be strong buys.

After all, as Andy explains…

It’s a continuation of the cycle we’ve seen over the last 12 years. It’s the product of an economy that’s addicted to dirt-cheap money and government stimulus.

As soon as the Fed begins to hint that it believes the economy is strong enough to remove some stimulus, rates rise, sellers sell and the market dips.

The Fed is forced to back down and the cycle continues.

This cycle is precisely why Andy created his Modern Asset Portfolio. If you’ll recall, it is built around interest rates – the 10-year real rate, to be exact.

The portfolio tracks the yield of the 10-year Treasury and also takes inflation into account. This gives us a much stronger sense for the direction of the market… and what we should be buying.

And right now, Andy says, the 10-year real rate is telling us…

We should not be on the sidelines. We should not have our money in a savings account, just waiting for a clear buying opportunity.

It won’t come.

Compared with this time next year… and the year after… stocks are cheap.

So forget the whiplash the headlines are giving us. Focus on the market’s real indicator. It’s the only number that matters in this market. And right now, it’s telling us to buy.

Amanda Heckman
Amanda Heckman

Amanda Heckman is the editorial director of Manward Press. With unrivaled meticulousness, she has spent the past dozen or so years – give or take a few sabbaticals – sharpening Andy’s already razorlike wit. A classically trained musician and a skilled writer in her own right, Amanda takes an artistic approach to the complex world of investing. Her skill has led her to work with numerous bestselling authors, award-winning financial gurus and – lucky for us – the fine folks at Manward Press.