Investors are constantly trying to assign a reason to the market’s moves and I’m sure there are many legitimate narratives for gold’s fall and the S&P 500’s rise. However, the simplest explanation is usually the correct one, and in this case it’s mean reversion. Gold couldn’t rise in a straight line forever (although some would have you believe it will) and U.S. stocks weren’t going to crash forever either.
Mean reversion is conceptually simple to grasp, but harder to figure out in real-time as the mean for most markets and valuation levels is probably a moving target and the timing of the reversion is always subject to change.
But if you understood nothing more than the fact that the markets and the economy move in cycles you would be far ahead of the majority of investors.
Source:
http://awealthofcommonsense.com/shine-gld/
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