Back in November of 2022, The Trends Journal had forecast a stock market spike in 2023. We noted that over the past 40 U.S. midterm elections, the S&P 500 rose 16.3 percent in the next 12 months and considering the economic data, the trend would continue.
Then in February, we had forecast a market slump in March, followed by an equity spike until August. And, this past July we had forecast the beginning of a sharp U.S. equity market decline beginning in September and into October.
The markets peaked in August with the S&P 500 up nearly 20 percent since the start of the year. Heading for its first quarterly loss of the year, the S&P is now down 8 percent from its high. The Russell 2000 Index of small-cap stocks is down 11 percent from its high while The Nasdaq and Dow are down more than 6 percent and 4 percent respectively this month.
Adding insult to the economic injury, with interest rates high, August new home sales came in low, with homes under contract down 8.7 percent from July, according to the Commerce Department.
Feeling the pressure of rising inflation, higher interest rates, and lower economic expectations, the Consumer Confidence Index, which was at 108.7 in August, fell to 103 in September, according to the Conference Board… sinking the fastest since December 2020 when much of the world shut down to fight the COVID War.
With any number below 80 signaling a recession within the next year, the Conference Board’s Expectations Index—which measures consumers’ income expectations and the outlook for business and labor market conditions—slumped 73.7 in September, down from 83.3 in August and 88 in July.
The Conference Board’s chief economist Dana Peterson said that “Expectations for the next six months tumbled back below the recession threshold of 80, reflecting less confidence about future business conditions, job availability, and incomes,” and that they “may be hearing more bad news about corporate earnings, while job openings are narrowing, and interest rates continue to rise—making big-ticket items more expensive.”
As forecast, here we are. Get ready. The worst of the economic crisis has just begun.
Presstitutes on Parade
The true economic hardship facts add up to “zero” when reported by the mainstream media. On the business end of so-called “journalism,” all they do is sell the line that the economy will stay strong and to keep gambling in the stock market casino. (It should be noted that minus “business,” all the mainstream media sells to the public is fear, hysteria, and celebrity bullshit to keep pumping up their sinking ratings).
The equation is simple. The higher interest rates rise, the deeper economies will fall. And again, barely, if ever, reported by the Presstitutes is that governments and the Bankster Bandits are responsible for the worsening economic conditions. It was they, who, in their quest to fight the COVID War, flooded the world with countless trillions of dollars of fake money backed by nothing and printed on nothing—and
lowering interest rates to record lows—to artificially prop up economies and equities that should have crashed because of the global lockdowns.
As a result of the cheap money printing schemes, as Gregory Mannarino details in his article this week, “MAXIMUM SATURATION”, the system becomes unable to support any more debt and then starts to break down.
Again, this was caused by politicians and the Bankster Bandits, who, after denying it for years, began to raise interest rates to fight the inflation spiral they created. So, the future is clear to see. The higher interest rates rise, the deeper equities and economies will fall and the guess on the The Street keeps changing from the belief that the U.S. will hold interest rates where they are and only slightly lower them in 2024.
And the “big” news making the business news today is that Jamie Dimon—the head of the crime-infected JPMorgan Chase, which has admitted to five separate felony counts brought by the U.S. Department of Justice, says considering the rate of inflation, interest rates could go up much higher than their current 5.25 percent to 5.50 percent range.
In an interview with The Times of India he said, “I am not sure if the world is prepared for 7 percent. I ask people in business, ‘Are you prepared for something like 7 percent? The worst case is 7 percent with stagflation. If they are going to have lower volumes and higher rates, there will be stress in the system. We urge our clients to be prepared for that kind of stress.”
TREND FORECAST: Dimon is wrong. The U.S. will not sink into stagflation, it will fall into Dragflation: declining economic growth and rising inflation.
On the equity market side, this is not rocket science. With high-interest rates providing investors 5 percent or more in money market funds and/or U.S. Treasuries, there will continue to be less gambling money going into equities. Thus, the longer interest rates stay high, and the higher they go, the deeper the equity markets will fall.
Therefore, there is a high probability of a severe stock market selloff in October. And when the equity markets crash, the struggling consumers will awaken to the real dangers confronting the entire economy.
With holiday hiring already down as we reported in last week’s Trends Journal, the upcoming holiday consumer spending may well fall into negative territory. And with some 70 percent of the U.S. Gross Domestic Product based on consumer spending, the U.S. will slide into Dragflation.
Over in Europe, recession has hit Germany, the fourth largest economy in the world, and will hit the rest of the Eurozone economies according to S&P Global. Last Friday HCOB released its flash Composite Purchasing Managers’ Index (PMI) for the Eurozone which measures overall economic conditions that came in at 47.1 in September. Any number below 50 equals contraction.
TREND FORECAST: And now, with oil and gas prices rising as winter sets in, a bad situation will be made worse as Europe also sinks into Dragflation.
LAST WEEK: FED HINT GIVES STOCKS THEIR WORST WEEK IN SIX MONTHS
U.S. equity markets notched their worst week since March, with the Standard & Poor’s 500 index falling 2.9 percent over the five-day stretch, its’ third consecutive week of losses.
The Dow Jones Industrial Average gave up 1.87 percent over the week. The NASDAQ—heavy on tech stocks, which are particularly sensitive to interest rates—dove 3.35 percent to mark its worst weekly performance in six months.
The markets retreated after the U.S. Federal Reserve’s Open Market Committee met last week and gave strong hints that it would raise interest rates again at its next meeting on 31 October.
Fed chair Jerome Powell also told a press briefing that the bank is likely to keep interest rates higher for longer than it had previously forecast to ensure that inflation is under control.
In another dose of negative news, bank officials have indicated that the “neutral rate” at which inflation is tamed and the economy continues to hum—a rate the Fed would likely hold indefinitely—might be higher than had been thought earlier.
The Fed’s news left analysts and investors to guess how higher interest rates that last longer will impact consumer spending and corporate investment.
The economy might not sustain itself under a lengthy period of high interest rates, analysts warned.
As stock prices slid through the week, bond yields rose. Investors were drawn to their safety as well as their high yields.
On 21 September, the yield on the two-year treasury bond climbed to 5.148 percent, its highest since 2007. The 10-year treasury bond briefly rose to 4.55 percent, a 15-year high and the largest one-day jump since June 2022, The Wall Street Journal said. The return settled down to 4.438 percent as the market closed on Friday.
Bond yields rise as prices fall.
If yields stay higher for longer, as the Fed implied, bonds will look more attractive than stocks because they offer a respectable yield without stocks’ drama and volatility. That dynamic could bog down equity markets indefinitely.
Partly as a result, during the five trading days ending 20 September, mutual funds and exchange-traded funds showed net outflows of $16 billion, LSEG Lipper data showed.
For the week, gold’s continuous contract edged down less than 0.01 percent to close at $1,944.90 at 5 p.m. U.S. EDT on 22 September.
Brent crude seesawed through the low $90s, ending the week off less than 0.01 percent at $93.83 at 5 p.m. U.S. EDT on 22 September. West Texas Intermediate, the benchmark for U.S. oil prices, fell back below $90 on 21 September but recovered to $90.03 by 5 p.m. Friday, down 1.7 percent on the week.
Bitcoin gave up less than 0.01 percent, trading at $26,597,90 at 5 p.m. U.S. EDT on 22 September.
Overseas, stocks largely had a glum week.
The London FTSE 100 cast off 0.36 percent. The trans-European Stoxx 600 was down 1.77.
Japan’s Nikkei 225 sank 3 percent, while the South Korean KOSPI slid 3.1 percent.
In Hong Kong, the Hang Seng index ticked down 0.06 percent.
Equity prices brightened on mainland China’s key exchanges after data showed the central bank’s recent mild stimulus measures had boosted economic activity. The CSI Composite index added 1.08 percent and the tech-centric SSE Composite managed a 0.7-percent gain.
YESTERDAY: STORM CLOUDS ON THE HORIZON?
The Dow Jones Industrial Average was up 43.04, or 0.13 percent, to 34,006.88 and the S&P was up 17.38, or 0.40 percent, to 4,337.44. The tech-heavy Nasdaq Composite was up 59.51, or 0.45 percent, to 13, 271.32.
Traders will be digesting important data by the end of the week, which will include Costco earnings, an updated reading for the second-quarter GDP, and new consumer-spending data that is due out on Friday.
Neel Kashkari, the Minneapolis Federal Reserve president, told Reuters that strong consumer spending continues to mystify economists.
“I would have thought with 500 basis points or 525 basis points of interest rate increases, we would have slammed the brakes on consumer spending and it has not slammed the brakes on consumer spending,” he said. “It continues to exceed expectations.”
Costco is expected to report earnings per share of $4.78 on revenue of $77.7 billion, according to Investing.com.
Elsewhere, London’s FTSE was up 59.92, or 0.78 percent, to 7,623.99 and the STOXX 600 2.82, or 0.62 percent, to 450.44. In Asia, Japan’s Nikkei was up 276.21, or 0.85 percent, to 32,678.62 and South Korea’s Kospi was down 12.37, or 0.49 percent, to 2,495.76. Hong Kong’s Hang Seng was down 328.16, or 1.82 percent, to 17,729.29. China’s Shanghai Composite shed 16.82, or 0.54 percent, to 3,115.61 and the Shenzhen Component was also down 58.11, or 0.57 percent, to 10.120.62.
TREND FORECAST: The Trends Journal has long noted that the Commercial Real Estate Bust will have a devastating impact on the economy, and high-interest rates are going to continue to worsen the problem.
Finally reporting what we had long warned, today, The Wall Street Journal featured a front page article entitled “Office Market Slump Hits Booming Atlanta.” But unlike what we have long warned, there has barely been a word about the massive defaults that will bring down much of the banking sector. And the higher interest rates rise the more it will cost in the landlord’s attempt to secure new loans … which equals more defaults on the near horizon.
OIL: Brent crude closed the day 2 cents higher to $93.29 a barrel and New York-traded West Texas Intermediate was 35 cents to $89.68.
“The market may be still wrestling with the Fed keeping interest rates higher for a longer period of time, which can impact the demand side of the equation,” Andrew Lipow, president of Lipow Oil Associates, told Reuters.
TRENDPOST: The Trends Journal has forecast that oil prices will hit around the $100 mark—not because of any new demand—but instead thanks to OPEC+ countries reducing the amount of inventory.
GOLD: Spot gold was down yesterday 0.5 percent to $1,915.61 per ounce, while U.S. gold futures settled 0.5 percent lower at $1,936.6.
The precious metal suffered under pressure from a strengthening U.S. dollar, which makes the precious metal less attractive for overseas buyers. Austan Goolsbee, the Chicago Federal Reserve Bank president, chilled the gold market when he said he expects interest rates to remain high.
Everett Millman, chief market analyst at Gainesville Coins, told Reuters that he believes a slightly hawkish Fed, in addition to other central banks, will continue to keep gold prices suppressed.
“My baseline forecast is that gold will reach a new all-time high in 2024, if we see at least a mild recession in the global economy. If we get a recession, Fed will be forced to cut rates sooner,” Millman added.
TRENDPOST: Millman must be reading The Trends Journal because Gerald Celente has said the Fed will take its foot off the gas just in time for the presidential election in 2024—so the controlling party gets a political boost. But when those rates are lowered, the U.S. dollar’s value will go with it, and gold prices will jump.
BITCOIN: The world’s most popular crypto was trading up $144.90, or 0.55 percent, to $26,395.10 as of 4:21 p.m. ET.
Crypto traders noted that the Security and Exchange Commission’s delayed decision as to whether it approves a Bitcoin exchange-traded fund, or ETF, has kept prices relatively subdued, The Coin Telegraph reported.
TODAY: DOW GIVES BACK NEARLY 400 POINTS AS NEW CONCERNS ABOUT ECONOMY EMERGE
The Dow Jones Industrial Average shed 388 points, or 1.14 percent, to close the day at 33,618 and the benchmark S&P 500 gave back 63.91, or 1.47 percent, to close at 4,273.53. The tech-heavy Nasdaq Composite was down 207.71, or 1.57 percent, to 13,063.
The 10-year Treasury yield reached 4.554 percent today, which is a level not seen since 2007, which has some investors “on edge” about what it means for the economy. Brian Riedl, a senior fellow at the Manhattan Institute, posted on X that if the level is sustained, it will be “catastrophic for long-term federal deficits.”
“This is much more important than the vast majority of daily politics and culture fights getting most of the media’s attention,” he posted.
Neel Kashkari, Minneapolis Federal Reserve president, wrote in an essay posted today that asked if the central bank was tightening enough to bring services inflation back to target.
“It might not be, in which case we would have to push the federal funds rate higher, potentially meaningfully higher,” he wrote. “Today I put a 40 percent probability on this scenario.”
Consumer confidence hit a four-month low, according to data released today by the Conference Board. Consumer confidence hit 103.0, which was down from 108.7 in August. The S&P CoreLogic Case-Shiller 20-city house price index rose 0.9 percent in July, despite high mortgages because of inventory shortages. Buyers are more willing to pay cash on the barrelhead while competing for fewer properties.
Elsewhere, London’s FTSE was up 1.73, or 0.02 percent, to 7,625.72 and the STOXX600 was down 2.64, or 0.59 percent, to 447.80. Asia was also in the red. Japan’s Nikkei tumbled 363.57 points, or 1.11 percent, to 32,315.05 and South Korea’s Kospi was down 32.79, or 1.31 percent, to 2,462.97. Hong Kong’s Hang Seng was down 262.39, or 1.48 percent, to 17,466.90. China’s Shanghai Composite was down 13.33, or 0.43 percent, to 3,102.27. The Shenzhen Component was down 60.47, or 0.60 percent, to 10,060.15.
OIL: London-traded Brent crude futures settled the day 67 cents higher, or 0.7 percent, at $93.96 a barrel, while New York-traded U.S. West Texas Intermediate crude futures settled 71 cents higher, or 0.8 percent, at $90.39.
TREND FORECAST: As we had forecast since the beginning of the year that Brent Crude would hit the $100 a barrel mark by year’s end. To date we are only $4 shy of that mark.
Considering the ramping up of the Ukraine War by the United States and its allies and Russia cutting back diesel fuel, despite a slowing global economy, the OPEC+ oil cartel will do what they can to keep prices high.
Thus, the higher oil prices rise and the slower the economies grow, the deeper nations will sink into Dragflation: declining economic growth and rising inflation.
GOLD: Spot gold was off 0.8 percent to $1,900.17 an ounce, while U.S. gold futures fell 0.9 percent to $1,919.00 based on hawkish comments from central banksters about keeping interest rates high.
TRENDPOST: As we have long forecast, with high-interest rates pushing the U.S. dollar higher, with gold dollar based, it is becoming too expensive for foreign buyers.
Gold prices will continue to be under pressure with a strong dollar. However, should stock markets rapidly decline, gold prices will rapidly rise as investors seek safe-haven assets.
BITCOIN: The world’s most popular crypto was trading down $93, or 0.35 percent today, to $26,203 as of 4:30 p.m. ET.
Like gold, bitcoin faces pressure when the U.S. dollar is high and, since it is a non-yielding asset, gets hurt when Treasury yields climb.
A bright spot was a Chinese court’s decision to recognize Bitcoin as a digital currency based on its scarcity and inherent value, Coin Telegraph reported.
The report noted that the Shanghai No.2 Intermediate People’s Court in China called bitcoin unique from other digital assets. The court said bitcoin continues to be used around the world despite being decentralized with no central authority. The report noted that the court’s ruling could give bitcoin “more legitimacy” in the country.
TRENDPOST: Would-be crypto investors are still considering the recent collapses of platforms like FTX and find hope signs when bitcoin is acknowledged in courts, but remain outside the bounds of government oversight.
As we have long forecast, bitcoin is stuck in the current range and has not hit high or low breakout points. On the downside it will be $15,000 per coin range, and on the upside when it breaks above the $30,000 per coin range.