Market Mayhem is Due to Truly Perfect Storm for 2019 Recession

Sunday, June 16, 2019
By Paul Martin

By David Haggith
June 15, 2019

“The perfect storm” has become a cliché, but the current setup for a 2019 recession just became so text-book perfect in alignment of the three most critical recessionary forces that I have to use it.

Let me start by noting that a stock market that rallies because the news is bad — as happened a little over a week ago when we got a terrible new jobs number (only 75,000, less than half of the weak number economists expected and lower than what it takes just to keep up with population growth) — is a market that is locked in dependence on recovery-mode life support where everyone is happy just because the ambulance will soon be on its way … again.

That market as well as the “recovery economy” built around it is destined to fail because you cannot sustain growth or build enduring wealth on the need for an endless flow of bad news to keep forcing central banks to create new money in order to keep goosing the marketplace along. It’s a stock market running on absurdity. The need for endless salvation is not the hallmark of health. However, the market’s codependency on the Fed is not the set-up I’m talking about. It is merely evidence that this soaring market is not a healthy market. (A tree blooms most, you know, just before it dies.)

It is, however, exactly the kind of stock market we have become used to because the market has become addicted to Fed support (I’ll call it “Fedaid”) over the past decade. Because this abnormality (in a broader historic context) has become the new norm, investors fail to realize that this time is greatly different because of three truly significant situations in its setup that I’ll lay out below. This time, bad news is the worst of news, but the market — because of its decade of Fed-addled memory — completely fails to see the storm that is arriving all around it right now. That kind of blindness can also be the setup for one hellacious crash.

Market Mayhem sets up the 2019 recession

You see, investors think the market is plunging up and down on the waves because it is trying to break through a hardened ceiling that has held up for eighteen months. During those eighteen months, the market dropped off of three tops that were barely successively higher than each other (just enough higher each of the last two times to test whether going higher was possible and then fail).

Some of the market’s talking heads think the market is about to break through what they hope has become a brittle ceiling with a fourth push — this time for the big run into the heavens — if the market just gets a little Fed juice. The bad news about jobs was just the enticement they needed to restore hope that the Fed juice is coming. Others are starting to wonder what the rough ride is about. This time, the churn is not just because the market is attempting a fourth breakout. It is due to some deep developing issues setting up a situation where Fed juice at this particular time would be Jonestown Kool Aid®!

The Rest…HERE

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