Albert Edwards: Just One Aberration Prevents A “Petrifying Bear Market”
by Tyler Durden
ZeroHedge.com
Jul 20, 2017
One month after he shared his preview of the endgame of this current centrally-planned economic regime (expect no happy ending there, as “citizens will soon turn their rage towards Central Bankers.”) Albert Edwards is out with a new note asking whether “H2 2017 will undo the trend of lower inflation, bond yields and the dollar?” and – if the answer is no – he cautions that “investors might give some thought to the fact that we are now just one recession away from Japanese-style outright deflation!”
The creator of the “deflationary ice-age” concept starts off by noting that equities have risen to new all-time highs as weak US inflation data have reduced expectations of further Fed rate hikes. This has driven both bond yields and the dollar lower and in turn EM and commodity prices higher. But, Edwards warns, the trend might easily reverse as the second half of this year progresses.
“This might dampen the impact of recent compelling evidence that core CPI and wage inflation seem destined to remain curiously weak throughout the remainder of this cycle.”
But as the SocGen strategist concedes, a far bigger question is how the recent equity highs sit with our Ice Age thesis – is it dead or just sleeping?”
Before he answers that question, Edwards first reminds us that with the latest inflationary print, US core CPI and wage inflation have surprised on the downside for four successive months and argues that “only two data points are sufficient for most of us to be able to draw a trend, but four data points surely provide clear evidence of the decisive re-emergence of a deflationary trend. At the very least this recent data is grounds for a dismissal of the argument that ‘end of cycle’ inflationary pressures might make a brief appearance, before the long-term deflationary secular trend reasserts itself in the next downturn.”
The Rest…HERE
