Base Jumping off the Stock Market’s Peak
By David Haggith
TheGreatRecession.info
April 1, 2017
According to Bank of America, there is no time to leap into the stock market like the moment before its cataclysmic fall. BofA’s Michael Hartnett has no doubt that the stock market stands on the edge of catastrophic collapse, but the euphoric rise before it takes the plunge could be the greatest financial rush you’ll ever know:
As Hartnett explains, the catalyst for bull in equity and credit markets since 2009 was the “revolutionary monetary policy of central banks” who, since Lehman, “have cut rates 679 times and bought $14.2tn of financial assets.” And, once again, he warns that this central bank “liquidity supernova” is coming to an end, as is “the period of excess returns in equities and corporate bonds, as is the period of suppressed volatility.” (Zero Hedge)
The tail-end risk of this trade
What happens to the Fed’s economic recovery when the Fed ends its money boom just as irrational exuberance in the stock market is retreating? Unless Trump pulls a magic rabbit out of his hat that looks far better than his “great” health-care plan, the Trump Rally will quickly turn this year into the Trump Dump.
Consider what the Trump Dump could turn into: The Fed plans 3-4 rate increases into the unwind of the irrational Trump Rally. It also hinted this week at money-supply reduction. This unwind of Fed and folly will fall into an economy where earnings are far from justifying inflated stock prices, where jobs pay about the same as they did thirty years ago (adjusted for inflation) and where benefits are far below what they were thirty years ago, while the peak of retiring baby boomers dives into a pool retirement funds that have evaporated out from under them because of the Fed’s decade of near-zero interest. (That just names a few of the hazards that lie ahead on this trajectory.)
What could possibly go wrong?
The Rest…HERE
