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The phony economic boom that drove up economies and equity markets when politicians launched the COVID War nearly three years ago is over.
The world has entered into the first phase of the collapse as Dragflation—negative economic growth and rising inflation—spreads across the globe.
But, of course, the Presstitutes—media whores who get paid to put out by their corporate pimps and government whore masters—refuse to acknowledge our Dragflation forecast despite our sending out thousands of press releases detailing the economic realities supported with hard data.
Instead, they keep spouting the “stagflation” bullshit: stagnant economic growth and rising inflation.
No, the economies are not “stagnant,” by the hard facts they are in decline, such as the United States, the world’s #1 economy, which has racked up two consecutive quarters of negative economic growth.
And adding to their mainstream narrative of covering up the hard reality hitting We the People of Slavelandia, they report, as they did today on Bloomberg, that “Core Inflation Cools in Canada.”
“Cools?” Hitting 7 percent in August, it was a big deal that it dropped .6 percent from July. Before the COVID War was launched by politicians in 2020, the 2019 inflation rate in Canada was 1.95 percent.
Thus, despite inflation being still red hot—it was brought down by gas prices which plummeted by 9.6 percent in August on a month-over-month basis—the word on The Street is that Canada’s central bank will ease up on its interest rate hikes: “Today’s numbers reinforce our view that the Bank of Canada might only have one 50-bp rate hike left, whereas the Fed could very well continue raising rates for longer and to higher levels,” Royce Mendes, head of macro strategy at Desjardins Group, said in a note, Reuters reported.
On the news of a lower than .75 percent interest rate hike that was expected, the Canadian loonie hit a 2020 low against the U.S. dollar. Thus, consumers pay more to buy less. Indeed, for the working people, they saw food prices spike by 10.8 percent in the past year… hitting a 41 year high.
Name the country, it’s global. With Tokyo’s Banksters keeping interest rates low and pumping in artificial stimulus to jack up the economy, Japan’s inflation hit a 31 year high while its yen, losing a fifth of its value this year, fell to a 24-year low against the U.S. dollar.
Over in China, with economic growth rapidly slowing as a result of the nation’s years-long zero COVID policy, its yuan fell to 2020 levels, while in the U.K., their sterling, hitting a 1985 low against the dollar, is no longer shining.
In looking across the globe, for example, so far this year, against the dollar, Argentina’s peso fell 30 percent, the Hungarian forint slumped 20 percent, Egypt’s pound is down 18 percent, South African rand down almost 10 percent.
The ICE U.S. Dollar index, which measures the dollar against a basket of other currencies among its trading partners, spiked nearly 15 percent this year, racking up its strongest rise since the index was launched in 1985.
Again, as we have noted, the U.S. dollar is strong because the other currencies are weak… and not because of strong U.S. economic fundamentals. Therefore, with the dollar in—as The Wall Street Journal calls it—“a once in a generation rally,” the strong dollar will push down global growth while putting more pressure on other central Banksters to follow the Fed’s lead to raise interest rates. And the bet is, tomorrow they may raise interest rates by at least .75 basis points and as much as one percent.
Also on the big downside, as we have long reported, the higher the dollar rises the more money it will cost nations and businesses who borrowed dollars when they were cheap to pay back their debt. On the emerging market front, according to the Institute of International Finances, emerging markets have $83 billion of U.S. dollar debt that is due at the end of next year.
Again, this is old news to Trends Journal subscribers. (See “Dragflation Top Trend: Strong Dollar Batters Emerging Nations’ Currencies” 5 Jul 2022, “New World Disorder Top Trend: Emerging Nations Diving Into Debt Default” 12 Jul 2022, “Strong Dollar Threatens Developing Nations” 27 Jul 2021, “Is The Dollar Too Strong?” 12 Oct 2021, “Strong Dollar Weakens Other Economies, Forces Higher Rates” 2 Aug 2022, “New World Disorder Trend: Emerging Nations’ Currencies Take A Beating” 17 May 2022, and “Central Banks Around The World Raised Interest Rates Last Week” 9 Jul 2022.)
TREND FORECAST: Knowing that the cheap money game launched by politicians and their Banksters buddies to fight the COVID War is over, equities continue their downward slide. Over in the U.S., the S&P 500 and Nasdaq had their worst week since June, and forecast, it will go from bad to worse: the higher the Federal Reserve raises interest rates, the steeper the artificially propped up equities and economies will fall… across the globe.
We maintain our forecast that equities will fall deep into bear territory and there will be a sharp real estate slump… with the commercial business sector taking the biggest hit. Remember the bullshit when politicians locked down businesses and the gutless morons that believed in their leaders supported their draconian mandates? They said that it would not hurt business or suck the joy out of life and nightlife… “It’ll come back!,” the masses and mass media babbled.
As we have long forecast, it did not come back. According to Kastle Systems, office occupancy in the U.S. during the busiest days, Tuesday and Wednesday, was down 45 percent from pre-COVID War 2019 levels. And in New York City’s metro area whose financial service sector heavily relies on commuters, its office occupancy rate is down 54 percent from pre-lockdown highs.
The Wall Street Journal reported that just 5 percent of 187 companies surveyed by Gartner demanded that people come to work 5 days a week. Indeed, the three days-in-the-office and two-days-working-at-home has become the new normal.
Again, as we had forecast some two years ago, this trend will crash the commercial office building sector as more people work from home and businesses dramatically cut back on office space. And, of course, sadly, it will put hundreds of thousands of businesses that relied on heavy commuter traffic out of business.
Also, as we had forecast, the deeper economies dive into dragflation, the higher the crime rates will soar… as we again note. Indeed, as Gerald Celente says, “When people lose everything and have nothing left to lose, they lose it.” (See, in this issue, “Hell’s a Poppin: Crime Wave America”).
LAST WEEK: GLOOMY ECONOMIC OUTLOOK SINKS STOCKS
Goldman Sachs announced layoffs. General Electric said lingering supply chain issues are damaging profits. Economic bellwether FedEx will close branches due to slackening demand that cut its second-quarter profit. The company warned of weakening macroeconomic trends worldwide. (For more details, see “Troubles for ‘Bellwether’ FedEx Foreshadow Global Economic Downturn” in this issue.)
Repeating what we have long been forecasting, equity strategist Roger Lee at Investec told the Financial Times last week that “Underlying conditions have deteriorated quite sharply over the last couple of months.”
“In the first half [of this year], companies were able to get price rises through to consumers,” he said. “We may be getting to the point where that’s getting more difficult.”
The drip-drip-drip of negative news took down the Dow Jones Industrial Average by 4.1 percent last week. The Standard & Poor’s 500 index gave up 0.7 percent and the NASDAQ was off 5.5 percent, its worst week in three months.
All three indexes have lost money in three of the past four weeks.
Also, inflation’s pace moderated less than expected in August, falling to just 8.3 percent from July’s 8.6.
As a result, investors now foresee the U.S. Federal Reserve continuing to raise its key fed funds interest rate more aggressively than has been hoped.
In the futures market, speculators are marking a 76-percent chance that the Fed will add another three-quarters of a point to the rate at its next meeting, heightening the risk that the U.S. economy will sink into recession.
Yields on two-year treasury notes are especially sensitive to expectations about interest rates. The yield closed last week at 3.859 percent, its second-highest return this year after reaching its highest on Thursday.
Gold’s continuous contract lost 3.3 percent for the week, sinking to $1,684 on 16 September.
Brent crude oil’s price tried to reach $96 a barrel during the week but ended the period essentially flat at $90.70 on 16 September at 5 p.m. U.S. EDT. West Texas Intermediate, the U.S. benchmark grade, edged down a fraction to $85.11.
Bitcoin slid 13 percent to $19,531 at 5 p.m. U.S. EDT on 16 September.
Overseas stocks were glum as well.
The all-Europe Stoxx 600 was down 2.9 percent and Japan’s Nikkei 225 lost 3.3 percent. In South Korea, the KOSPI index slipped by 0.5 percent.
In Chinese markets, Hong Kong’s Hang Seng also shrank by 0.5 percent. The SSE Composite was off 3.5 percent and the CSI Composite gave up 2.9 percent.
YESTERDAY: TREASURY YIELDS SKYROCKET AS FED MEETING LOOMS LARGE
The Dow Jones Industrial Average increased by 197.26 points, or 0.64 percent, to close at 31,019.68. The S&P 500 also gained 0.69 percent to 3,899.89, and the NASDAQ Composite also rose 0.76 percent to close at 11,535.02.
It was another bumpy ride for stocks and investors are waiting for news out of Tuesday’s Federal Reserve policy meeting. There is a sense that the market is looking to find its direction.
The top news of the day from The Street was the 10-year U.S. Treasury note hitting 3.489 percent yield, its highest in over a decade. The Wall Street Journal noted that the two-year yield also hit its highest levels since 2007, hitting 3.946 percent.
“The last time 10-year Treasury yields were at these levels, S&P downgraded US credit quality, and the Eurozone was at risk of breaking apart,” Michael A. Gayed, the publisher of The Lead-Lag Report, posted on Twitter. “That which is old is new again.”
Investors believe that the U.S. could be entering a recession and expect the Federal Reserve to announce another 75 basis point interest rate increase after disappointing CPI numbers that show inflation at 8.3 percent in August. Traders are now pricing in an 81 percent chance of a 75 basis point increase and a 19 percent likelihood of a 100 basis point jump, Reuters reported.
The paper noted that Moderna, the COVID-19 vaccine maker, saw its stock price lose 7.1 percent on the day after President Joe Biden said in an interview that aired Sunday where he said the pandemic is over.
Elsewhere in Europe, the STOXX 600 was down 0.37, or 0.09 percent to 407.87, and the FTSE lost 45.39 points, or 0.62 percent to close at 7,236.68. Like the U.S. market, European traders are keeping their eyes on the upcoming announcement from the Fed. Last week, European markets saw their worst 5-day span in three months due to concerns about a global recession.
In Asia, Japan’s Nikkei lost 308.26, or 1.11 percent, to close at 27,567.65, and Hong Kong’s Hang Seng Index was down 195.72, or 1.04 percent to close at 18,565.97. China’s Shanghai Composite Index lost 10.80 points, or 0.35 percent at 3,115.60 and the Shenzhen Component Index also fell 0.48 percent to 11,207.04.
Asian markets were in the red as traders jumped out of riskier assets before the Fed’s next meeting on Tuesday. Both the Shanghai Composite and Shenzhen Component were at lows not seen in four months.
TREND FORECAST: The 10-year Treasury and two-year yields inverted on Monday, which investors see as a clear sign that a recession is looming. US Bank noted that investors typically expect to be rewarded with higher yields for investing their money for longer periods of time.
Simply put, the higher it costs to borrow money the more it costs to service debt. And the higher the cost of taking on new debt it is not worth borrowing money to make investments be they in playing the markets of investing in new projects.
OIL: Brent crude for November rose Monday 65 cents, or 0.7 percent, to $92 a barrel and West Texas Intermediate for October also increased by 62 cents to $85.73 per barrel, or 0.7 percent.
The key factor weighing on oil prices are concerns of recessions and the zero COVID policy lockdowns in China, the world’s largest oil customer.
TREND FORECAST: The global economy is slowing due to the COVID War that destroyed the lives and livelihoods of billions across the globe. And a bad situation was made much worse with the sanctions the Western nations imposed on Russia following their invasion of Ukraine.
There are a lot of wildcards at play when it comes to the near future of the oil price. Israel continues to bomb Syria and if it takes military action against Iran oil prices will spike; The Ukraine War is dragging down economic growth while spiking gas and oil prices; OPEC+ countries have fallen short by 3.6 million barrels per day of its target laid out in August, and it getting worse.
Thus, should these incidents escalate, they will push oil prices much higher, putting more downward pressure on both emerging and developing nations. Their economies will also continue their downward drift in countries that heavily tighten monetary policy to fight inflation.
GOLD: The precious metal continued to slump on Monday and was down as much as 0.9 percent as it continues to meet resistance at around $1,680.
Gold investors will be listening to what Federal Reserve Chairman Jay Powell says after the Fed meeting.
The Trends Journal has noted that a strong dollar and rising Treasury yields tend to hurt the price of the precious metal, which does not offer any yield.
TRENDPOST: While gold has lost much of its status as a safe-haven asset, we maintain our forecast that considering the current and emerging socio economic and political trends, gold prices are near their bottom levels and will rise as global economies deeply decline and geopolitical conflicts intensify.
BITCOIN: The world’s top cryptocurrency had another uncomfortable day—hitting as low as $18,400 per coin. Ether was also down to as low as $1,290.
The Trends Journal has long noted the close ties between cryptos and Treasury yields. Crypto traders are tentative with the upcoming Federal Reserve meeting, that could make Treasuries all the more appealing to investors.
We have noted that everyone was watching to see how well Ethereum did with “The Merge,” which was called successful, according to CoinDesk. But as of Monday night, Ether is down about 17 percent due to the likelihood that investors are taking the “sell-the-news” approach, according to the report.
Bitcoin has been extremely volatile and social media has been a town square of debate between bitcoin loyalists and those who have abandoned—at least temporarily—the asset.
“Until modern times everyone in human history could see the stars in the night sky,” posted one pro-bitcoin “HODLER.” “Similarly, until the fiat era, everyone can see the value in everyday goods and services. Light pollution distorts the sky. Money printing distorts value. #Bitcoin lets you see the stars again.”
TRENDPOST: If Jay Powell sounds dovish after the Fed meeting, watch cryptos see significant gains in the $23,000 range. But that is unlikely to occur and Powell is expected to raise interest rates by at least 75 basis points… or possibly one percent.
TODAY: STOCKS DOWN, ALL EYES ON FEDERAL RESERVE’S NEXT RATE HIKE
Stock traders in the U.S. were anxious today as they wait to hear the next interest-rate announcement from the Federal Reserve, and consider whether or not the likely 0.75 basis point increase has already been baked into prices.
The Dow Jones Industrial Average was down 313.45 points, or 1.01 percent, to 30,706.23, and the benchmark S&P 500 was down 43.96 to 3,855.93. The NASDAQ Composite was down 109.97, or 0.95 percent, to 11,425.05.
Leading the way with losses was Ford, which had its worst day of trading in 11 years after warning investors in a pre-released third-quarter earnings report obtained by CNBC that it absorbed $1 billion in unexpected supplier costs. The stock closed down $1.84 a share, or 12.32 percent, to $13.09. The company blamed vendor inflation. The Dearborn, Mich., auto giant estimates its third-quarter adjusted operating profits to come in between $1.4 billion to $1.7 billion. Wall Street’s estimate was $3 billion.
Weighing heavily on U.S. stocks was the anticipated announcement at the end of the week by the Federal Reserve that analysts believe will be a 0.75 percent basis point interest rate increase. There’s even speculation that the Fed could raise rates a full point.
The Trends Journal has noted that the equities market has been struggling this year due to a slowing global economy and soaring inflation. Since the beginning of the year:
- DOW: Down 5,878.83 points, or 16.07 percent
- S&P 500: Down 940.63 points, or 19.61 percent
- NASDAQ: Down 4,407.75 points, or 27.84 percent
CME Group’s FedWatch Tool says there’s an 82 percent probability that the central bank will raise rates by 0.75 percentage points; there’s an 18 percent chance that the Fed will increase rates by a full percent.
TRENDPOST: Young investors are learning that playing the markets is a gamblers game.
The gyrations in the market have intimidated the average investor, according to a new study. CNBC, citing an Ally survey of 900 investors, reported that about 1 in 5 customers have closed their brokerage account over the past year. About 21 percent of millennials and Gen Z respondents also said they closed their accounts.
Yes, the Fed, which brought interest rates to near zero while purchasing $120 billion of Treasury and mortgage back bonds per month until last November are the true inflation culprits. Not to mention the $8 trillion Washington used to artificially stimulate the economy to fight the COVID War—stupidly labeled in 2021 as the “American Rescue Plan.”
Elsewhere in Europe, London’s FTSE was down 44.02 points, or 0.61 percent, to 7,192.66 and the STOXX 600 was down 4.45, or 1.09 percent, to 403.42. In Asia, the Nikkei was up 120.77 points, or 0.44 percent, to 27,688.42, and Hong Kong’s Hang Seng Index was up 215.45, or 1.16 percent, to 18,78142. South Korea’s KOSPI was up 0.52 percent, to close the day at 2,367.85 .
In China, the Shanghai Composite Index was up 6.80 points, or 0.22 percent to 3,122.41, and the Shenzhen Component Index was up 76.88 points to 11,283.92.
The South China Morning Post reported that Beijing’s propaganda machine is working to sell the benefits of investing in the stock market, claiming that they should take a long-term view. The Securities Daily ran an editorial that said “mature investors” don’t worry about the index level in the short term.
The report noted that Goldman Sachs said there’s a chance that China uses its $57 billion in idle capital to bolster stocks before the Communist Party’s 20th national congress next month where Xi Jinping is expected to begin his third term.
Asian traders were cautious as they wait for a likely Federal Reserve interest rate hike later this week.
European shares were down due to anxiety over the upcoming Fed announcement. It has been a struggle for the European market, which had its worst 5-day streak in three months due to recession fears.
The European market opened in the green, but came down after the Swedish Riksbank announced that it will raise its rates by 100 basis points, to 1.75 percent. The central bank said inflation in the country was “undermining households’ purchasing power and making it more difficult for both companies and households to plan their finances.”
GOLD: The precious metal was trading down and as we go to press it’s at $1666 per ounce.
Gold traders will be monitoring the outcome of the Fed meeting on interest rates. The precious metal will likely face headwinds in the short term due to the strong dollar and high bond yields.
Prices were down as the 10-year Treasury yield hit 3.593 percent, which is the highest level since 2011. Gold is an attractive investment when there are fears of an economic slowdown, but becomes less attractive when Treasury yields are high and the dollar index is strong. The U.S. dollar is up 14.78 percent on the year, which turns gold into a less attractive investment for foreign investors.
TRENDPOST: It is no surprise that the non-yielding precious metal is struggling to attract investment from buyers who can find safe haven in the U.S. dollar index and U.S. Treasuries that are at decade-long highs. However, we maintain our forecast that as economic conditions sharply deteriorate and geopolitical tensions escalate, gold prices will rise as investors seek safe-haven assets.
OIL: Oil was down today on new recessions fears and concerns about the ramifications of the Fed’s upcoming interest-rate announcement.
Brent Crude was down $1.23 per barrel, or 1.34 percent, to $90.77, and West Texas Intermediate also shed $1.54 per barrel, or 1.80 percent, to $84.19.
The EU and U.S. continue to discuss what a price cap on Russian oil would look like in an effort to inflict pain on the Russian economy. Since the start of the Ukraine invasion, Russia’s daily output of oil is down 400,000 barrels, which is seen by analysts as resilient.
The International Energy Agency (IEA) said in its Oil Market Report last week that in December, when the EU oil embargo takes hold, Russia will have to find a home for 2.4 million bpd of its oil if it is to keep its exports at current levels, OilPrice.com reported.
The American Automobile Association noted that the average price of a regular gallon of gas on Monday in the U.S. was $3.67, and have declined for 14 consecutive weeks. Prices are still about 15 percent higher than this time last year.
TRENDPOST: Analysts from Bank of America said today that they think oil will hit $100 per barrel by the end of 2022, citing the “broad-based inflation in the U.S. and elsewhere” that will likely lift the floor on oil prices.
Fortune noted that oil demand in China, the world’s biggest customer, is down 2.7 percent this year, but is expected to pick up pace as COVID-19 restrictions are lifted and the country recovers from droughts in recent months.
BITCOIN: The cryptocurrency continued to struggle around the mid-day mark today and was down $551.80, or 2.82 percent, to $19,033.50 and is down 73 percent since November.
Investors are waiting to see the result of the Federal Reserve meeting to determine just how much more headwind the currency is going to face in the near term. The crypto reacts negatively when interest rates are high and the dollar is strong.
Jake Lloyd-Smith wrote in Bloomberg, “With delicious irony, the same week it registered a record, the Fed warned of perilous plunges for risky assets should the economy take a turn for the worse. As the US central bank responded belatedly to inflation, Bitcoin tanked.”
The Trends Journal has shown the correlation between tech stocks and the price of bitcoin. Barron’s noted that the markets have not “completely priced out the possibility of a mammoth 100-basis point rate hike, and the risk of a bigger-than-expected hike or more hawkish shift from the Fed is weighing on cryptos as well as stocks.”
TREND FORECAST: Crypto investors are waiting for news out of the Federal Open Market Committee meeting this week as the central bank has indicated that it is not comfortable with inflation in August coming in at 8.3 percent. Jay Powell, the Fed Head, is expected to announce a 0.75 percent interest rate hike at the end of the week, which will add pressure on cryptos.
The hike would lift the country’s benchmark interest rate to a range of 3 percent to 3.25 percent, which is the highest level in 14 years. The Fed is expected to raise the rate to as high as 4 percent by the end of the year and bitcoin is expected to be negatively impacted by a sharp rate hike.