Helping you navigate the new normal
investors are hoping Fed Chairman Jay Powell will soon signal a dramatic interest rate cut. And so they are positioning for a ‘Santa Claus’ rally. But most adults know that Santa Claus doesn’t really exist.
300+ years of Bank of England data shows that interest rates are typically inflation plus 2.5%. At today’s level, this would imply – US rates would be 3.7% + 2.5% = 6.2%: Japan would be 3.2% + 2.5% = 5.7%: Eurozone rates would be 5.3% + 2.5% = 7.8%; UK rates would be 6.7% + 2.5% = 9.2%
It seems highly likely that the Rebound rally is ending, and the market Downtrend is about to resume. Time spent on researching the paradigm shifts that will take us into the New Normal will likely prove very profitable for the future
“You can’t run the most reckless monetary and fiscal experiment in history without the bill eventually coming due. The first invoice arrived as inflation. The second has come as a financial panic, with economic damage that may not end with Silicon Valley Bank.”
The smartphone market has now been in decline for 5 years. And whilst the Fed would clearly love to get stocks racing to the moon again, history suggests that Apple’s CFO is likely to be right when auggesting that cost control, not innovation, is likely to be key for the future.
Now, we are all starting to suffer for the central banks mistake in adopting Bernanke Theory. The bubbles they created are finally starting to burst as interest rates return to more normal levels. This will be very painful for all those who trusted them to manage the economy.
Apple symbolises the major changes underway in the economy. Its stock price is in decline as central bank stimulus disappears. And its profits are threatened as pressure builds on its supply chain and pricing.
The history of the 1929 and 2000 downturns suggests the real pain is yet to come. Housing markets look terribly over-valued around the world, as I noted last month. And US consumer sentiment is at all-time lows. So most company earnings seem set to fall, with more than 60% of US CEOs now expecting to see a recession.
The market downturn couldn’t have come at a worse time for Apple. It was already facing major supply chain chaos in Q2. And now it has to face a major decline in the smartphone market itself. Inevitably this will lead to a brutal battle for market share as companies struggle to survive.
The central banks are now abandoning the ‘Bernanke Doctrine’ set out in November 2010 – that what was good for markets, was good for the economy.
Our pH Report Sentiment Index has been a very reliable guide to the S&P 500 in recent years. Now it is suggesting a major downturn may be underway as the US and Chinese stimulus programmes come to an end.
The Federal Reserve can’t control the fallout from the bursting of China’s ‘subprime on steroids’ real estate bubble
*Limited availability. First come, first served.
*Limited availability. First come, first served.
*Limited availability. First come, first served.
*Limited availability. First come, first served.
*Limited availability. First come, first served.
*Limited availability. First come, first served.