John Mauldin recently wrapped up his annual Strategic Investment Conference and shared some insights from his famous speakers. In his world, the information he passes on in his summary is simply nuggets. In my world, I have to dig into the context to bring it together. As an entrepreneur, I live in the everyday world. As such, it is easy to lose track of many images and sometimes, the right context in which the macroeconomic landscape can be seen. Reading the notes from Mauldin’s speakers clearly illustrates two main points for my own marketing.
First of all, I came across, “everyone is out of pool time” when the U.S. Federal Reserve Board announced that they were starting to slow down the pace of their ongoing Quantitative Easing (QE) program in May. The Fed will only do this for two reasons. First, the economy appears to be comfortable standing on its own two feet. Second, because the economy is big enough to stand on its own two feet, the economic slowdown will be removed from the system causing inflationary pressure.
The notes released by Mauldin show that while the unemployment figure is insignificant, there are many reasons not to be excited about it. He quoted speaker Steve Moore as providing the following statistics:
– Lower -wage industries accounted for 22 percent of recession losses, but 44 percent of recovery growth.
– Mid-wage industries accounted for 37 percent of recession losses, but only 26 percent of recovery growth.
– Higher -wage industries accounted for 41 percent recession loss, and 30 percent recovery growth.
The declining quality of available jobs may help explain why economic activities such as middle-class spending, home buying and lending activities have not yet responded to the declining count. in unemployment.
I think these are some of the reasons why the Federal Reserve Board is keeping QE on the table rather than tying itself to a topic that causes the exit rate of unemployment. The fact that the Fed has seen the underlying economy perform poorly is well illustrated in the chart provided by Mauldin which shows that more businesses are exiting the market than joining it. So, the Fed will keep its finger on the markets, distorting real rates of return and forcing those seeking to appreciate stock market capital.
These interest rate policies caused rates to return almost to their origins after the Fed announced its release more than a year ago. Interest rate markets recovered their 12.5% decline as commercial traders tried to take the market rally near the resistance level about 138 in the Long Bond that we thought was holding and caused our failure. short Long Bond position than a month ago Clearly, the market is pricing deflation rather than inflation.
Moving from the last trade to the next, we turn our attention to the overly expensive stock market. We have always stated that the best way to make money in the stock market, indices or ETFs is simply by buying breaks and we still subscribe to that theory when we finally support the “Stock Index Futures Expiration tendend.” That said, I see two points that need to be addressed. First of all, most of the basic information I see about the stock market is bad. It includes data from all major markets in the world. It also reinforces the point that artificial short prices are shifting what is typically sought after money in the equities arena as investors push to sustain livelihoods in their collective retirement portfolios.
The second point involves looking for an expected top in equities that may allow us to shift our focus from buying breaks to trading rallies. I think we can draw a correlation between the reality of each person versus the raised prices in the equity markets. We saw the S&P 500 and the Dow Jones Industrial Average make new high-time highs this month. Meanwhile, the Nasdaq 100 and Russell 2000 indexes made their respective highs in March. The point here is in the history, the small caps at the top or, underneath before many caps. In fact, the Russell 2000 sold more than 10% from making its high on March 4 and the Nasdaq 100 fell almost 9% after rising on March 7.
The current trading pattern in these markets leads me to believe that the Russell 2000 will not make a new high before the three-month end of June next year. This could be a classic example of technical momentum diversification. Nasdaq, on the other hand could make new gains that could be as high as 3855. That’s my call for height. As for the big caps on the S&P 500 and the DJIA, I think this expiration rally is a sell -off. The failure of Russell 2000 futures to make a new high should signal the end of the summer rally that started too early. We didn’t sell in May and walked away. Can we sell in June and see you right away?