BIG PICTURE US STOCK MARKET WHERE NOW?

SO WHAT NOW WITH EQUITIES?

?I really think we are running the?same old market sentiment playbook. Buying ahead of, extremely volatility to feed the?price makers our money during the event, and then more buying after the event, for any inflation data or FOMC meeting.

More than ever, I see this as mindless, pointless rationale of the herd sentiment taking place.

The Wall Street Group-Think dominant spin has primarily been driving bullish sentiment for nearly two years now on the idea of the Federal Reserve will be cutting rates. This means the entire market has been buying for a full two years on the idea of?something that hasn't happened yet. Just how invested in this idea, could a market be.

This is an extreme historical moment.

I have mentioned before that this could be a massive 'buy the?rumour, sell the fact' occurrence of a magnitude rarely seen before.

The world became addicted to the idea that big spending, free of responsibility governments, would always be there to save the financial world. The way they did in both the GFC and Pandemic crashes. However, they act late. Always do. Then they over-react to create the next even bigger bubble.?Yet, never has there?previously been such a?biopic single minded, perhaps mindless, addiction to one?simplistic market religious belief. That interest rates determine stock prices.

They do not. Often they are responding to the same stimuli. That is, stocks and rates move higher together in response to a strong economy. With the reverse being equally true. What we have at the moment are weakening economies with recently high inflation and rate settings. This is the worst possible scenario for stocks. Yet, the?honesty of such fundamental analysis is completely blown away by?extreme?fiscal largesse.

What comes next is a growing inability to spend bigger by government, just as the consumer and businesses continue to be squeezed further.

The US average wage is reportedly $65,000. When you remove the top 10%, this average wage, of still the great majority of Americans, becomes just $35,000. This, as the wealthy accelerate their riches as rarely seen in history. This is not a sustainable socio-politico-economic system. Something has to break.With the government already beyond full stretch, and with its head in the sand about the real state of the economy, (similarly the RBA in Australia by the way), the most likely first break in this system, given the?high Wall Street valuations stretching away from Main Street realities, is a stock market crash that substantially eliminates the wealth gap stretch that had been built up.?For the system as a whole, this is the most likely give.

THE ACCELERANT that kick-starts this already raging grass fire, the recent mini-crash, could well be the event of the Federal Reservecutting interest rates.

There?could be some momentary pricing upside on each of the first two rate cuts. The first cut could subsequently see some price hesitation which is concerning to investors. Failure to deliver windfall stock profits however on the second rate cut, would quickly turn all those longs into sellers.

(When everyone is long, they all forget that they are now nothing but a sea of potential sellers)

You see, they have been buying for two years in the belief of windfall profits. Many have already achieved these, but they still?maintain the expectation of even more coming their way from the rate cuts that were falsely predicted the previous?three years.

Please note, I always forecast from?before the first rate hike that rates would go as high as they have and that this would be an overshoot that would cause long term harm to the US economy. Such harm, that while for the first time I did forecast 1-2 rate cuts in the second half of this year, I do not expect even 4-5 rate cuts over the next 12-18 months being able to save the US economy from recession.

We are back to that point of the authorities being late again. 'Behind the curve' as they say. They seem to be extrapolating past errors into bigger and bigger cycles of boom-bust Rather than learning from them. The pure analytical mathematical approach depends entirely upon looking backwards. That buzz word 'data' is very much a two edged sword. Data, no matter how 'big' it is, cannot compete with imagination.

For one is a pure projection of the past into the future. While the other, is all about what might be that has not been before.?Which approach do you think could be most valuable in a fast changing and?evolving organic and emotional world?

Unfortunately, our central banks?possess zero imagination, and constantly fall back on 1960s text books that were never accurate in the first place.

If you think this story ends well, good luck to you.

We will be watching closely to profit in what I expect will be a massive bear market period. Perhaps lasting several years. Interestingly, this is also an accelerated way to enhance one's relative wealth, should this hypothesis prove correct.

It is possible to profit in both bull and bear markets.

Clifford Bennett

Look Out The Window Economist??www.cliffordbennett.com.au???

CLIFFORD BENNETT

NEWS TRADERS MACRO+A +7.2% Aug.

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