This website offers three (3) user-driven Question & Answer features. One -- the Subscriber Q&A -- is exclusively focused on questions related to our flagship newsletter service and only for subscribers. The FAQ (Frequently Asked Questions) feature also available in the Education menu is mostly for website use and general customer service questions. But THIS one is for ALL followers -- subscribers or not -- and is focused on investor-driven educational topics.
Our followers ask questions. We differ from many competitors by LISTENING and trying to answer up to every question. Sometimes the answers are better suited for delivery in an existing or future special report, webinar of investing insight topic. Sometimes the questions better fit in one of the other Q&A features. However, when we are asked a question that -- if answered well (which is the only way we do it) -- will be of interest to our followers as a whole, it very well may be posted here as soon as we can. Below find a batch of recently-asked questions and well-developed, all-original answers. Click the question bar to reveal the answer. Click another question bar to close one question and open another.
Why are so many stock sectors selling off recently?
With the “Trump trade” in full effect, the S&P 500 and NASDAQ 100 have been hitting new highs, as shown below. So have the most expensive and speculative stock market sectors, including Technology (second clip), Communication Services (third clip) and Consumer Discretionary (fourth clip).
These three sectors are being driven by the mega-cap “Magnificent Seven” and related tech stocks. For example, over 40% of the Technology ETF “XLK” is in Apple, NVIDIA and Microsoft. Nearly 50% of the Communications Services ETF “XLC” is comprised of Meta (Facebook), Google and Netflix. Even more concentrated is the Consumer Discretionary ETF “XLY”, which has over 40% in just two stocks: Amazon and Tesla.
By contrast, the Value Line Geometric Index, which represents the performance of the median stock, has fallen over 3% in the past couple of weeks. It is now trading just below its November 6 level, which suggests the post-election rally is already fizzling out.
Most Stock Sectors Have Been Falling Lately
While those three sectors have continued to rally on optimism over Trump’s future policies, which we discussed here, the other eight major US stock sectors have been falling in recent weeks.
As this chart shows, the venerable Dow Jones Industrial and Dow Jones Transportation Averages have both been falling in concert recently. The bottom clips show that the Industrials, Materials, Real Estate and Energy sectors have also been declining. They have also recently broken below key trend lines that have been supporting rising prices for the past several months, suggesting those uptrends may be over. These are most the most economically and interest rate sensitive sectors of the market, so this is not an encouraging sign.
This next chart shows that the Financials, Health Care, Consumer Staples and Utilities sectors have also been falling in recent weeks, with Health Care being particularly weak. All have broken below key trend lines of support, except Financials, which is still trading just above its trend line. The three that have broken support are the most defensive sectors, so the fact that even they are weak is particularly concerning.
Even AI-Mania Bellwether NVIDIA Is Weakening
The powerhouse stock that has been the driving force of the stock market rally for the past two years, after the bear market decline of 2022, is NVIDIA. We believe as NVIDIA goes, so goes the market.
As this chart shows, NVIDIA recently broke modestly below the uptrend line that has connected multiple price points and supported the stock during this two year rally. The bottom clip shows NVIDIA has also recently broken below its price uptrend line relative to the S&P 500.
Investment Implications
A healthy and sustainable bull market uptrend is characterized by most stocks and sectors participating in a bullish uptrend. With the Value Line Geometric Index (again, the median stock) still 9% lower than its late 2021 high three years later, along with the recent weakness in most sectors and even NVIDIA, we believe the stock market is not in a healthy and sustainable bull market uptrend.
Investor psychology and stock prices can always change and these are relatively recent and minor declines so far. But with employment declining and most leading economic indicators flashing recession warnings after the Fed’s most aggressive rate hiking cycle in over 40 years, and inflation remaining stubbornly high and starting to reaccelerate, we believe the most overvalued stock market in history is vulnerable for a major bear market in 2025.
How do gold ETFs work, what is gold seasonality and how is the current trend?
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Why are new home sales and home prices falling?
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What are Fed rate cuts and yield curve un-inversion telling us?
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Why is Warren Buffett selling so much Apple stock?
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What do the latest Fed Beige Book and declining oil prices tell us about the economy?
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How can there be a recession with strong retail sales?
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What do the latest manufacturing surveys tell us about the economic outlook?
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How do gold, silver and precious metal mining stocks perform in a recession?
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What is industrial production, retail sales and housing data telling us about the stock market outlook?
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Why is the Fed going to cut rates this month…and will it work?
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Can China help prevent a global recession?
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Is the latest inflation data telling the Fed to cut rates?
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What does the latest yen carry trade disaster mean for investors?
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Why will the Fed cut rates with inflation still well above 2%?
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What do you think of the recent weakness in NVIDIA stock?
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What does the recent PMI data tell us about the likelihood of recession?
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Is AI ushering in a new era for tech stocks and the market?
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What does the recent disappointing retail sales data tell us about the stock & ETF outlook?
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How can there be a recession with incomes growing?
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What is the Duncan Leading Indicator telling us about the economic outlook?
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Why did The Conference Board rescind their recession forecast?
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What is Warren Buffett telling stock and ETF investors with his large cash hoard?
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What does the latest GDP and inflation data mean for stocks and ETFs?
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What are your thoughts on the recent undercover interview with a Fed economist?
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What does the latest inflation report mean for Fed policy and markets?
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How can there be a recession with the unemployment rate so low?
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Is the Fed inflating the market because it’s an election year?
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Why are small cap stocks lagging large cap stocks?
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How can you see a recession coming, while the Fed and others are so bullish?
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What do you think about the latest US Leading Economic Index report?
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What are the risks of buying the Magnificent Seven stocks?
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Are there any signs that inflation will reaccelerate and the Fed won’t cut rates?
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How can there be a recession with low initial unemployment claims?
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What are key signs of a possible trend change for the stock market?
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What is the risk inflation re-accelerates in 2024?
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Do you expect the stock market to generate 10%+ long-term returns?
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Why isn’t the Fed expecting a recession?
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What are some important recession signs Wall Street is ignoring now?
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How can there be a recession when the consumer is so strong?
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What do the latest employment indicators tell us about the economic outlook?
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What is the current outlook for the housing market?
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Is Bitcoin going to the moon?
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Are the “magnificent seven” tech stocks a safe place to hide going forward?
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Does the latest strong jobs report prove a “soft landing” is coming?
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How long and severe do you expect this recession to be?
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How can there be a recession with employment still growing?
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Given the current seemingly mixed signals in the markets, what should a prudent investor should do?
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What is the best stock index to monitor for bull and bear trends?
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What do current stock market valuation levels imply for future returns?
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What will the likely impact be from the US credit rating downgrade?
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What are the implications of the latest Fed rate hike and inflation data?
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What are key economic metrics telling us now about a recession?
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What are the investment implications of the latest employment report?
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What is the outlook for Fed rate hikes going forward?
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What are the implications of the latest CPI report for the stock market outlook?
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Why is China lending so aggressively to developing countries and what is the likely outcome?
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What are the most important recession indicators to focus on now?
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Can NVIDIA and AI prevent a bear market?
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What does the latest retail sales report tell us about the economy?
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What does the latest jobs report say about the employment outlook?
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Why is money supply growth important and what is it telling us now?
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Who will likely suffer most from the current banking crisis?
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What is the likely success of BRICS countries to replace the dollar and what are the implications for the US?
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Since balance sheets are healthier than before the Great Recession, won’t this recession be mild?
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Will the banking crisis cause the Fed to “pivot” and cut interest rates?
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What do you make of Fed Chair Powell’s recent comments?
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What are the implications of the recent stock market selloff?
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What are the economic and investment implications of the latest inflation data?
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Do you expect a global recession, as well as a US recession?
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Is this stock market rally the beginning of a new bull market?
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How are investment opportunities different between bull and bear markets?
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What are the implications of the December employment report?
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What is the current outlook for US home prices?
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What are some low-risk investment alternatives with a decent return?
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What do you think of the market’s reaction to Powell’s recent comments?
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Are there any signs a US recession has ALREADY started?
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What is the best indicator for anticipating and trading bear market rallies?
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When do you expect the Fed to “pivot” and cut interest rates?
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Is it a good time to invest in real estate if higher inflation and interest rates cause a higher demand for renting?
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Given OPEC’s recent oil production cut, do you still believe oil markets have more bear market downside to come?
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What do ETF investors need to know about K-1 tax forms?
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What caused the current high inflation and what did the Fed do wrong?
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What does the European energy crisis mean for investors?
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What is Quantitative Tightening and how will it impact financial markets?
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What are the best and worst stock sectors in a bear market?
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How have your forecasts worked out over the past year? (Part 2)
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How have your forecasts worked out over the past year? (Part 1)
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How can you use volume as a technical indicator for investing?
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What problems are caused when banks create money out of thin air?
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Are dividend growth funds a good long-term investment at the moment?
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What do you think of Yellen’s comments that we will not have a recession?
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Do stocks always outperform T-bills and inflation in the long run?
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Are inverse ETFs worth considering as investment vehicles?
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Any thoughts on Bernanke’s recent inflation and recession comments?
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Is Bitcoin or gold a better inflation hedge now?
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Does the negative GDP report mean we’re already in a recession?
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Will the next bear market be one big disaster or a series of crises? And what will the Fed do about it?
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Is the Fed really trying to crash the housing, bond and stock markets?
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What is different between now and the 2020 stock market crash?
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In your “Stocks & Commodities” article, there were 4 times since 2009 that met your “sell short” criteria but were not major bear markets. Thoughts?
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What are credit markets telling us now about stocks and ETFs?
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What impact will the Russia/Ukraine war have and is the stock market correction over?
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How are major ETF asset classes looking on your Trend and Trade analysis?
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What does the latest inflation report mean for interest rates and the economy?
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Is the stock market rally over?
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What do your measures of stock market sentiment and internals tell us about the outlook for stocks and ETFs?
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What are technical trend lines telling us now about stocks and ETFs?
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Is it better to invest in Growth or Value stocks now?
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What is the best indicator to determine if a stock or ETF is “overbought” or “oversold”?
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What can the “Santa Claus rally” and “January Barometer” tell us about the outlook for the stock market in 2022?
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How will the latest Fed announcement to fight inflation impact stocks and ETFs?
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What is the VIX, why is it important and what is it telling us now?
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How will new Covid variants impact the economy and stock market?
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What do you think about investing in TIPS versus traditional Treasury bond ETFs given high inflation?
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What are the implications of high inflation for stocks, ETFs and the economy?
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Are we in another housing bubble?
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Why is EPS growth so important in stock investing?
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What can stock and ETF investors learn from the fact that Japan’s stock market is still well below its highs of 30+ years ago?
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Do you think the economy is heading towards “stagflation”?
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Your MarketWatch.com interview seemed very bearish. Are there any stocks or ETFs you recommend buying right now?
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Shouldn’t stock and ETF investors focus on current money supply growth, since it drives the economy and stock market?
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Why shouldn't investors just follow the simple Wall Street rule of “don’t fight the Fed”?
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How can you make money — instead of lose money — in a major bear market with ETFs?
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How important is stock market seasonality for stock and ETF investors, particularly in September and October?
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How concerned should stock and ETF investors be about margin debt levels?
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Are US Treasury Bond ETFs safe long-term investments?
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What are the key characteristics of winning stocks?
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What are the best and worst trending stock sector ETFs right now?
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What is the likelihood the next bear market and recession will be even worse than the Great Recession of 2008-2009?
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What impact will the US government’s stimulus package have on the economy and stocks?
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I've never invested before in my life. How do I start?
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What is wrong with a “buy and hold” or “asset allocation” investment strategy?
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Why is it so important to keep investment costs low on stocks and ETFs and how can that be done?
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What is the best way to invest to retire early?
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What are the best ways for investors to profit from stock bear markets, such as the 2008-2009 Global Financial Crisis?
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What are the historical long-term returns of stocks, bonds, bills, REITs, housing, gold, commodities and inflation?
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How can technical analysis be helpful to profit from bull and bear markets in stocks and ETFs?
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What is the primary cause of bull and bear markets in stocks and ETFs?
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How do you use economic indicators to determine the outlook for the economy, stocks and ETFs?
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How can you estimate the long-term returns of stocks, bonds, REITs and other financial assets?
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