STOCK MARKET MYTHS, MARKET REALITY


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Better late than never, finally mainstream market analysts from brokerage firms to the International Monetary Fund (IMF) are parroting our trend forecast that the current economic crisis by far the worst since the Great Depression and perhaps even more disastrous in its impacts.
But stock markets have gained more than 20 percent in value since their March crash, technically qualifying as a new bull market.
As we, and our Trends Journal contributor, Greg Mannarino, have long noted, investors’ euphoria is resulting from central banks and governments around the world continuing to prop up national economies with artificially cheap money to make markets appear healthy.
The global value of government rescue plans totals $14 trillion so far, according to the IMF. This includes central banks’ government and corporate bond-buying sprees as well as the banks’ willingness to venture into new areas, such as the U.S. Federal Reserve’s purchase of corporate junk bonds.
Indeed, this outright robbing of the taxpayers to bail out multinationals, hedge funds, private equity sectors, etc., is anathema to capitalism and a 5-Star Rating for corporatism.
Also, pushing markets higher have nothing to do with logic, but rather that automated stock-trading programs buy according to formulas, including triggering purchases when volatility drops below targeted levels.
Not only have tech stocks gained the most in recent days but even shares of travel and leisure businesses, which we forecast will at best modestly rebound, have risen 24 percent, cutting their losses to 37 percent this year.
Although it is being promoted in the business media that Bespoke Investment Group analyzed past stock market plunges and reports that when markets have regained half their losses, the worst is over, we disagree.
What is happening now is unprecedented. There is no model in history that compares with a global economic shut down imposed by politicians to fight the COVID-19 virus.
In the Great Depression, markets reclaimed 44 percent of their losses from their lows on November 29, 1929 to March 1930. But then they crashed again, losing 80 percent of their value and not regaining their 1930 high point until September 1954.
First-quarter earnings reports are grim, but the second quarter is likely to be far worse, even “horrific,” according to strategist Karen Ward at JPMorgan Asset Management.

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