The market is going to get bumpy going forwards and its good to have guide rail to cling on to.
The reason for the bumpiness is the hyper-scalers building out the AI future are going to be sucking all available liquidity they can from all possible sources and that is likely to be a serious drag on risk assets. Simply put cash is going to be pulled out of markets and is going to be spent building out titanic data centres, Power station’s, untold compute, you name it, and it will be pulled out of financial assets.
Gulp!
What is the answer? CTRL +P
The Fed is going to have to feed the beast. If it doesn’t the US wont win the AI war with China and its not going to be pretty if China has more IQ than the US.
So it will print.
That’s not a bad thing as the money will be spend on productive assets not flush down the pipes on ‘waste, fraud and abuse’ or lets just say non-productive inflation creating things.
So where is the Guide?
Here it is.
That is no accident.
You might imagine if you were trying to navigate the US economy blind with only a lever that says ‘more money’ or ‘less money’ what better real time guide than the backbone of US industry. It would certainly pass the cut of old monk ‘OCCAM.’
So lets dig a little deaper.
Lets look at the S&P 500 but lets keep it simple. If you cant draw a chart with Crayola its probably too complicated to be right.
So the wide market is slowing but the Blue chip Bulwarks are going in a straight like.
What to do?
If Dow keeps on trend all is right with the world (in general) but if it breaks the trend go risk off.
The S&P 500 shows certain parts of the spicey end of the market is not so predictable.
That stress is here:
So its worth keeping an eye on both ends of the market because with liquidity tightening and fluctuation it will be a good idea to watch these tight trends because if the market deviates from them it will be time to make plans.