On the “Happy Days Are Here Again,” news that U.S. air travel is down 70 percent from a year ago; 60 percent of America’s restaurants that shut down during the lockdown won’t reopen; hotels total revenue per available room (TRevPAR) is down 88.9 percent, and cinema, theme parks, trade shows fairs, concerts, and conventions are dead and dying, etc., etc…. U.S. stocks hit new highs yesterday.
Why?
It’s a gamblers racket that lacks any semblance of logic, hard facts, and indisputable data.
As Gregory Mannarino articulates in his “FORECAST: MELT-UP, CRASH-DOWN” article in this week’s issue, “The current stock market is 100 percent disconnected from the U.S. economy.”
TRENDPOST: Go back to April, just after markets tanked in late March. The word on The Street was it would be a “V-shaped” recovery.
As the economy sunk lower, the mainstream “experts” backed down one letter to a “U”-shape recovery.
Now (leaving out the F, U, & C), their new letter of economic choice is it will be a “K”-shaped stock market recovery.
Yes, the NASDAQ and S&P closed at record highs on Monday, but 20 percent of the companies listed in the S&P are seeing their share prices holding at less than half their all-time highs. The average stock price is 28.4 percent below its record high, reported research firm Cornerstone Macro.
The record stock market gains are driven by a few giants. Alphabet, Amazon, Apple, Facebook, and Microsoft alone account for 25 percent of the market’s rally since March; together, they have a market cap of $7 trillion, more than the 2,170 companies list in Japan’s Topix Index, Bloomberg reported.
The power of those few stocks has distracted from the strains pressuring other companies in the index.
That has led The Street to describe the market’s recent behavior as K-shaped: a crash followed by soaring prices for a few banner corporations with a lagging price recovery for many more.
Tech stocks are up 27 percent this year. Discretionary consumer stocks have risen 43 percent, but 43 percent of that gain is attributable to the 78-percent rocket in e-commerce, driven largely by one company: Amazon.
Many other companies in the S&P are debt-heavy and still thin on cash flow, which risks their survival.
Defying the reality on Main Street, today, while the Dow closed down 80 points, the S&P 500 rose to another record and the NASDAQ Composite hit another all-time high.
Gold was down some $9 to settle at $1,928 an ounce, even as the dollar fell against the euro, closing at 93.009. As we note, typically, the lower the dollar falls, the higher gold rises.
One reason is that as the dollar weakens, investors buy gold as the alternate safe haven asset. And, as the dollar moves lower, gold, which is dollar based, becomes cheaper to buy with other currencies.
Silver moved a bit higher today, closing at $26.75 per ounce.
Again, we maintain our forecasts for gold and silver prices to continue to rise throughout the year as central banks pump in trillions to artificially inflate equity markets and boost failing economies.
Thus, the more digital cash backed by nothing and printed on nothing they inject into the system, the deeper the value of the currency’s fall and the higher precious metal prices will rise.
TREND FORECAST: With the Presidential Reality Show® now in its home stretch, the Trump administration will do all it can to keep equities from crashing before Election Day in November.
Despite such effort – such as putting pressure on the Federal Reserve to bring interest rates into negative territory plus other money-pumping schemes undreamed of – we forecast significant equity market turmoil … with a high potential for a market crash by years end.
