The US stock market continues to gyrate wildly with many key Dow stocks staging truly horrific meltdowns.
This market is beginning to look eerily like the bear market that started in 1929. Instead of buying stocks as the business cycle troughed as Barrack Obama was elected, many investors appear to have bought maniacally after Trump was elected at the peak of the cycle.
Some of these investors morphed into frenzied price chasers as 2018 began and now they feel only pain. It’s a horrific situation. Can it be reversed?
For the possible answer to that important question:
Donald “The Golden Trumpster” Trump appears to have sold a lot of his stock market holdings in 2014-2015. He invested some of the huge profits in hedge funds that have little correlation with the stock market.
Unfortunately, most of his fans didn’t follow him, and they are feeling intense pain, partly because his freight train approach to tariffs is now pounding many of their stocks into bear market territory.
These tariffs are creating a surge in the dollar that is weighing heavily on US exporter earnings and causing the trade deficit to spike higher.
This is happening as US government debt soars like Icarus, which is putting intense pressure on bond market yields. The rancid stock market cake is being iced with a Fed that is ramping up QT (quantitative tightening).
Corporations are starting to abandon stock market buyback programs and workers are demanding higher wages. Of prime importance, modest goods deflation is set to be overwhelmed by service sector inflation.
Some mainstream money managers and analysts already appear to be terrified and are talking about “2008 again”.
They are using the Fed as a scapegoat, but they don’t seem to realize that the general US economy is still strong. It’s just the stock market that is incinerating, not Main Street, and rightly so.
Jay Powell and his “crew” at the Fed are not going to stop quantitative tightening. Jay is not interested in stopping rate hikes, especially with service sector inflation set to spike higher. Jay himself has stated publicly that he doesn’t pay much attention to the US stock market.
