The Quiet Before
The US Treasury (Bond) market is ready to submit to the inflation argument, the gold price is about to reveal a physical shortage of gold as well as a crumbling global monetary order, the strong dollar policy is about to have the rug pulled out from underneath it, the blue chip end of the stock market is now precariously close to the precipice, and commodity prices appear to be revved up for another good leg. That is the point we've arrived atů but it's really quite quiet out there.
The Buying Climax
Why wouldn't last week's Fed inspired Dow Industrials reversal, for instance, foretell a reversal in fortune for the US economy? Well, first, the rally itself is not likely a reversal. It was a clear-cut buying panic in a bear market. A buying panic in a bull market is one thing - it is usually motivated by the fear of missing out on a good thing. But that isn't what seemed to occur here, last week.
For one, since it is a bear market the panic buyers were probably the professional shorts, hedge funds, and fund managers either locking in profits, preventing an erosion of capital, or liquidating their risk insurance, respectively. The point being that they were motivated by the fear of capital loss, not of not making enough of it. Nonetheless, a panic is a panic, and it is more often followed by reversal than continuity. Besides, since when does a government intervention, alter the primary market trend?
Still, what if the market is beginning to discount changing underlying fundamentals that are already turning bullish for the US economy? Indeed, what if the economy is picking up momentum now? But where would it come from? The consumer is showing signs of fatigue, the business sector appears to be over invested in the wrong places, which might account for the rapid slow down in capital expenditures that the FOMC refers to in its last policy statement, and lastly, there must be a drag on the US economy through trade - due to a strong (expensive) dollar, by this point.
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