Investment Themes for 2010 — Part 1
It’s that time of year. It is time to start seriously thinking about the investment themes for the coming year. And the way I see it, identifying these themes is no easy task. Coming off what can only be called a remarkably unusual year for stocks and the economy, I think 2010 will be rife with bizarre twists, abrupt turns and some heavy challenges.
During the next 10 weeks, I’ll be discussing my top 10 investment themes for 2010. In today’s first installment, I want to tell you about what I think could be the dominant trend in the year ahead — rising interest rates.
If we look at the charts below of the 10-Year Treasury Note ($TNX) and the 30-Year T-Bond Yield ($TYX), we can see the recent trend is rising bond yields. Both of these bond yield charts now are well above both their short-term, 50-day moving average (blue line), and their long-term, 200-day moving average (red line).
Why are rates on the move? Well, for one thing, there are a whole lot of Treasury bonds out there for sale in the open market. An ample supply of bonds, and some rather tepid demand, means bond prices must fall (i.e., yields must rise) in order to make these bonds more attractive to potential purchasers.
As the supply of bonds continues getting bigger and bigger in an attempt to fund all of the new federal government debt, look for bond yields (i.e., interest rates) to continue rising.
In fact, I am more convinced than ever that interest rates are going to be much higher in the months and even years to come, and that means you can make some real money with an allocation to investments that benefit in a rising interest rate environment.
Subscribers to my Successful Investing, High Monthly Income and ETF Trader advisory services all have exposure to rising interest rate funds, which tells you how strongly I feel about this investment theme.
Mark my words: interest rates almost certainly will rise in 2010, and if you know how to make this trend work for you, you’ll be way ahead of the investment curve.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
