Credit: ADVFN
The situation is extremely dire in the global economy and that is creating fragility in the markets. Bonds are collapsing because interest rates are going up because of inflation caused by the “Covid Economic response.” First world countries now have emerging market balance sheets, and bond market problems will blow back into either depression or high inflation or both. The U.S. stock market is on the edge of another 20%-plus fall. So the dominos are all line up.
This economic crisis is not fate, but the U.K. government bond bail out, the South Korean QE move, the dollar/yen situation are all flares from the economic volcano stirred up by the U.S. Federal Reserve’s tightening which has still only just got underway.Credit: Federal Reserve That baby bend in the end of QE/QT is what has the world by the throat. It’s not surprising because the world took a two year economic sabbatical where it borrowed to pay its way. Now that’s a financial hole it has to dig itself out of and that process has reached an ugly stage that is set to get uglier.The SP500 chart - looking very bearishI’ve written before that the bottom would be 3,500 and that worked out well, but now I’m less than sure.
The implication of a bearish view on the US stock market is that there will soon be hell to pay. If the world has levered up sovereign bonds then this will be an undoing.