When I woke up this morning, I saw the market getting crushed again. The Joe Biden market takes away your wealth almost every single day by .5% to 2%. The Joe Biden economy costs you more and more every day because of inflation. Isn’t $5 a gallon gas great?
Here is a chart of the S+P futures since Jan 11, 2021. It’s been years since we have seen a real bear market in the US. 2008 was a crash, not a bear. The true bear was in the 1970s through the early 80s until the Reagan Revolution took hold. Some of us remember them.
As friends of mine on Twitter have said, “Every buy gets met with strong selling.” The sentiment in this market is not good. Years ago when the NASDAQ was at all-time highs, I was on Bloomberg Television and predicted a big drop. I was taken off the air since it was so outlandish. I sold the market in August 2007, but was around a year early.
Looking today and more importantly looking at the undercurrents in this market I don’t think you can be bullish. It’s not just the Fed finally getting religion and raising interest rates from artificially low rates.
What else is going on?
A war in Ukraine which in itself is NOT bearish. However, since a lot of the world’s wheat and fertilizer comes out of that area, the war will limit the world’s food supply and drive prices of food and energy higher. That’s inflationary. The war also creates a measure of uncertainty, and markets hate uncertainty.
Government spending is not slowing down. Sentiment to slow down or cut government spending isn’t even ignited yet for real. It’s just chatter because it plays well with voters. That’s inflationary.
The Covid lockdown in Shanghai will be inflationary as the worldwide supply chains continue to feel the bullwhip effect. By the way, if you want to see what socialism/communism in China is really like, click this link.
An FYI, Bernie Sanders, and the Democrats want to usher in socialism. Here is socialism in China. Ain’t their ideas great? The Chinese have lots of free stuff and they have full employment.
Hunter Biden’s laptop is finally being disclosed. Democrats will do it as fast as possible to get it out of the way ahead of the midterms. Republicans will continue to press it. All in all, it leads to less confidence in government and more suspicion. Americans universally detest crony capitalism and corruption. Leadership on both sides of the aisle is not great and doesn’t inspire confidence. That will show in the market.
Joe Biden’s uneven leadership combined with his economic policies creates uncertainty. You never know what Joe will say. Trump’s tweets were more predictable. Trump’s economic policies on the whole were pro-growth.
Inflation isn’t great for stock market returns. It’s only great when you hold hard assets. One backward way to take advantage of inflation in the stock market might be to own exchanges that trade commodities. Inflation isn’t great for the bond market either until you own bonds that were issued right before inflation turns. My buddies that bought 30yr treasuries in 1981 were happy with the return until they expired in 2001. Then they bought the NASDAQ.
We are going to have a recession in the US. The question is when does it start? Looking at that chart I posted above, I can’t help but think the S+P is headed to the high 3800s.
Stocks aren’t “cheap” yet.
When does it end? Hard to say. America doesn’t lie down forever and in the long run, you never make money shorting the American stock market. But, in the near term, it sure looks like you can sit on your hands before buying.
I know jack shit, and here is my take. S&P's trade in a range for some time, which puts me into the bearish camp. The ES 4100 zone needs to be taken out without a big buy response. Bitcoin looks particularly vulnerable, but it's also in a big range. The key 30,000 zone looks like it will be tested, however. Maybe crypto now is a leading indicator?
Rising interest rates are bad for the market, but how high can they raise them? They effectively can't raise bigly these days. Thoughts?
It doesn’t feel like a bear market, yet. Stocks are choppy, plenty of uncertainty, and the bias is tilted towards the sell side but I see too many irrational buyers who aren’t interested in P/E or any valuation metric, for many of these (mostly young) investors the broad market is a casino. All you need is luck and low interest rates; and on that note I read something this morning that on this day in 1981 the Fed Funds rate was 15%, today it is 0.33%