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What Junk Bonds Convey About Investors’ Mindset

“Governments feel rich and are spending like drunken sailors”

by Bob Stokes
Updated: October 21, 2021

Extremely elevated financial optimism is being expressed in multiple ways.

In some ways, the behavior of investors is unprecedented -- which is saying a lot given the financial extremes of past bull markets.

Consider the junk bond market here in 2021. The September Elliott Wave Theorist showed this chart and said:

NegativeRealYield

As we continue to demonstrate, stocks, property, cryptocurrencies and digital art are not the only overvalued markets. Bonds are no less crazily priced. The chart reveals that fully 85% of all junk bonds yield less than the annualized percentage change in the Consumer Price Index. How is that for blind optimism?

Yes, stocks remain near record-high territory after a more than 12-year uptrend, bitcoin is near record-high territory and the rate of price increases in the housing market has been unprecedented (again, saying a lot given the extremes of the prior housing boom).

Even so, an Oct. 18 Fortune article says:

In the next 15 months--through the end of 2022--Goldman Sachs is forecasting U.S. home prices will soar another 16%.

And, who would have ever imagined a few short years ago that digital images would sell for millions?

Yet, here’s the latest headline (Oct. 19):

How a 12-year-old coder says he made $600,000 by selling Weird Whales NFTs

Of course, "NFT" stands for non-fungible token -- a unique digital asset. The current craze in that space is around digital artwork.

The October Elliott Wave Theorist mentions several more expressions of a positive social mood. Here are just a portion of them:

Governments feel rich and are spending like drunken sailors; central bankers are confident and unworried, and they have been characterized as heroes; the world economy is producing more tax revenue than ever, despite government efforts to kill productivity; and there are no wars anywhere on the entire planet.

The October Theorist concludes with a hint of what to expect over the next three years.

The Elliott Wave Theorist is part of our flagship investor package, which you can access by following the link below.

EWI’s Analysts Set Price Targets for Major U.S. Financial Markets

EWI's analysts set price targets for stocks, bonds, gold, silver, the U.S. dollar and more... in accord with the Elliott wave model.

Price targets are a far more effective strategy for investors and traders, versus making impulsive decisions "in the moment."

Realize that most investors feel highly optimistic at major tops, and deeply pessimistic at major bottoms. In other words, investors' emotions have historically betrayed them at key turns.

Learn the price targets our Elliott wave experts have set for key U.S. financial markets -- and why -- by following the link below.

Emerging Markets vs. Commodities: Moving Together, Again

Commodities and emerging markets usually move together... except of most of 2021. Now, they are moving together again: down. Watch our monthly Asian-Pacific Financial Forecast editor explain the significance -- and give you a hint at what's next.

New, December European Financial Forecast: Sneak Preview

Normally, stocks peak first, and consumer sentiment follows -- but in Germany, the two have reversed -- why? Also, what does the anxiety in the forex market say about the wave structure of the broader market? Watch our European Financial Forecast editor Brian Whitmer touch on all of that in this short video.

Here’s a Warning Sign for the Non-Fungible Token Marketplace

The November Elliott Wave Theorist mentions key financial markets and says "it is a unique era." One aspect of this "unique era" is the monetization of digital content. Here are some timely insights.