Powell was in front of congress today practically pleading that a new stimulus package be passed, hinting that without it, markets would tank. Economists and market analysts seem to disagree with Powell. Since I believe Powell had made a 180 degree turn against being independent and is, in any case, a know-nothing, I tend to be on the analyst's side. Although a new stimulus would greatly benefit the jobless and the low-income group, it won't make a difference to the current tendency for markets to go lower. Many of the investors that bought in April & May have determined that taking the huge profits the current overshoot has created is the right strategy. These market players are not going to re-enter at 30 (50 in some cases) multiple, so, the selling is likely to continue... the likes of RobbinHood participants will create mini rallies and the big players will sell on them... I believe the balance will be "sell the rally" rather than "buy the dip" for a while The NQ 14% fall from high to low in 3 days is one of the fastest correction in history (excluding bot induced intra-day flash crashes), even exceeding the March falls.
Inflation... Several central bank governors have spoken about the 2% inflation target in recent days, apart from just muddying the waters as to what the Fed would do if inflation exceeded 2%, I have to say that it is obvious that central bankers never go into a supermarket nor buy a house or car. From my viewpoint, to say that inflation is stuck at under 2% is a lie. I found a supermarket receipt of 6 years ago stuck at the bottom of my drawer the other day, looking at prices then and now for the same items I always buy, inflation there averages at 13%pa. My home appreciated over 4%pa over 6 years, the car I had 6 years ago now costs 20% more. The mobile phone I replace every 2 years always costs at least 20% more than the last one.... So what exactly is inflating at under 2%? Are central bankers obsessed with going to negative rates while also printing money that they lie about inflation? Easing money supply is inflationary, I see inflation everywhere but the central bankers don't. Does anyone want to tackle this one?
Observing last week's market behaviour one can see US futures holding-up during ASIA & EU sessions but selling-off during the US session. It appears election jitters are starting to influence players. A Biden win will mean higher corporate and capital gain taxes, one affecting earnings, the other affecting investors directly. Volatility will be here until the elections are decided... thereafter if Biden wins there might be a gradual easing of stock prices for quite some time. Biden has not spelled-out his agenda (or maybe he hasn't got one) so the guessing adds to the volatility.
I should add that if exit polls show Biden to be the likely winner and Trump does go through with his current threat to annul the result, the mess created might well see Pelosi taking the presidency. I'm saying that the multi-fronted uncertanty over the economic recovery and the possibility of messy elections should see markets going lower from here.
Not too sure about that... I don't think the VP retains that position if the president loses his, in such case the Speaker takes the position until the mess is cleared with new elections.
As was the case last week, US markets held-up during ASIA & EU Sessions then sold-off 400pts (DOW) when those markets closed, however, on Wed there was a rally at the close. All told, the DOW had a 900pt swing. Reasons for the rally are unclear as it came in the face of several announcements of lay-offs by some big names, in fact, what I had mentioned a while back, white-collar jobs are starting to go in substantial numbers, this will directly reduce the purchasing power of consumers and hurt the bottom line of companies. Job losses traditionally lag any recession but 7 months into the pandemic with no reduction in daily infections and therefor no back to normalcy in sight, has been enough for many big names to make the difficult decision to let their middle management employees go. The economy has been artificially propped-up but the day of facing the reality is catching-up. I do not think the recovery is as good as markets are factoring.
Even with 25th Sep dip that put most indices in correction territory, US Markets are Significantly Overvalued. Based on the historical ratio of total market cap over GDP of 120% to 140%, current ratio at 176.6% is 30% to 50% over the normal. An investor buying now is likely to lose a minimum of 3% in a year (including dividends). My view is that markets are going lower in the face of continual lay-off and election jitters. Last night's debate did nothing for neither Trump nor Biden. Biden did not give any insight on his agenda, just spent all his time criticizing Trump with no insight on how he would do things better. I think 2020 was an optimum time for an independent to take the presidency, shame there isn't one.