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By Gregory Mannarino TradersChoice.net
Currently the European Central Bank and the Federal Reserve are engaging in “emergency/unconventional” measures to stabilize the debt/credit markets. These actions came about AFTER an uncontrolled sell-off in the debt market which caused the 10-year yield to spike.
The current actions of central banks are intended to get more cash back into the stock market… will it work is the question.
Over the last 6 months the U.S. stock market has fallen, and just last week the SP500 fell 20 percent off its all-time high—the definition of which is a bear market.
Beginning at the end of last week, the SP500 got slammed, falling very hard over several days as the 10-year yield made an uncontrolled spike all the way up to 3.5 percent from a previous 3.12 percent! A 38-basis point spike higher in 2 trading days is unprecedented.
Now that the actions of the ECB and the Federal Reserve have at least for the time being stabilized the debt market, many people have written to me as of late who now think that, at least temporarily, cash WILL make its way back into the stock market followed by a very large drop. Others think new record highs are just around the corner. Still others believe that the stock market is crashing now…
What these central banks are now engaging in has certainly caused bond yields to drop SUBSTANTIALLY! Almost miraculously! A 30-basis point drop in the 10-year yield occurred in just 1.5 trading days! This action has caused the debt markets to stabilize, however, the cost is much higher inflation as they themselves continue to inflate, (which is their ultimate goal).
All these central banks are doing is exacerbating the current issue, a full-on debt crisis which we are in right now… and how are they attempting to “fix” this? By adding more debt to the current crisis! Therefore, exacerbating the underlying problem, itself.
They are not fixing anything; they are making it worse.
I believe that despite the current actions of central banks to stabilize the debt/credit markets, all this will do is just push off a meltdown in the debt markets—henceforth why central banks are resorting to some kind of emergency policy posture right now.
With that, I still believe that the market capitalization of cryptos will balloon as the debt markets implode. I also believe that the price of gold, silver, and other commodities will skyrocket.
As for the stock market, I still firmly believe that an implosion in the debt market will eventually occur despite any actions taken by central banks to push it off.. and world stock markets will melt down.