Despite all the fanfare and cheerleading you hear in the MSFM, the recent bounce in equity prices has just been a rather pedestrian bear market rally. Bull markets are not engendered by a faltering global economy, very high rates of inflation and the most hawkish global central bank tightening cycle in history. In spite of these dynamics, stock prices have now completely priced in a perfectly soft landing for the US economy. How else would you characterize trading at 17.
Wall Street is trying to convince you that peak inflation will lead to a Powell Pivot towards dovishness. A dovish fed is one that is cutting rates back to zero percent and engaging in QE. But, peak inflation, which will still be 3-4 times higher than the target rate, should only cause the fed to reduce its hiking pace to 50 basis-point increments from 75 bps.
Lower bond yields and peaking inflation was a greenlight for higher stock prices in July. But that ebullience over an improving inflation rate should soon just become another signal of faltering economic growth.The National Association of Realtors' housing-affordability index, which factors in home prices, mortgage rates and family income, fell to 98.5 in June. That is the lowest level of affordability in the past 33 years. Mortgage costs are up 54% y/y in June.
Therefore, rather than getting caught up in chasing the FOMO rally, it is much smarter and beneficial to your financial health to get positioned for what is happening next: a global recession, which pushes money into US sovereign debt and the US dollar; and out of equities. That is, at least until Powell has the cover to perform an actually pivot back to QE and ZIRP, which will then start to cause the dollar to tank and stagflation to run intractable.
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Source: KitcoNewsNOW - 🏆 13. / 78 Read more »
Source: KitcoNewsNOW - 🏆 13. / 78 Read more »