Without a doubt, know one except a few ghouls want a crash. No one needs one either. Markets don’t listen to wants and needs; it responds to the flow of money. The has been unprecedented flows and the market has reached unprecedented levels.
We now have inflation and I maintain it is not an accident. Inflation is always a function of government policy although governments always claim ‘it wasn’t me I didn’t do it.’ How inflation works is, in the most art, economics 101.
Why do we have inflation?
This chart demonstrates.
Printing money made this rally. If they hadn’t filled in the hole with debased currency the death spiral would have been biblical.
Now the reset comes through inflation. Actually it is not a reset, which is important to grasp, as there is no going back.
So what is the future direction?
WW3 aside:
The market can trade sideways trade for 2-5 years, propped up by flushes of liquidity and in real terms the market will be worth 30-50% less in real terms.
The market can crash and grind back.
The latter would only be cause by an unexpected outcome because the central banks have their gip on the markets and for now seem quite capable of manipulating monetary levers to get the system back into balance. However that is still a long way off with plenty of things to go wrong. A $2Tr deficit is only a step back from the brink and will maintain an inflationary situation.
Apparently the US economy is booming with a 5% increase in GDP, but if you remove inflation how is growth looking then?
Its going to be a bumpy road.
How to trade it? By big dips, buy deep value. And step carefully. The next couple of weeks looks kind of pivotal, was that a dead cat bounce or the beginning of a years long sideways trade. I think we are in a supported bear market so its going to be very hard to make money and even harder to beat inflation.
Its easy to forget this:
I an world where markets are not left to their own devices, this would be the natural aftermath of a stock market boom.