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DOUBTS OVER FUTURE GROWTH CLOUD MARKETS
As we have been forecasting since COVID War 2.0 was launched in July, there will be a sharp market correction. Indeed, in addition to our Trends Journal forecasts, Gerald Celente has been on numerous interviews stating that a major stock market correction would occur this year and as early as September when the summer vacations ended and the gamblers returned to The Street.
With fear of the Delta virus still being spread by the media, politicians and bureaucratic “health official” flunkies, stock and bond prices fell and bond yields rose last week as weakening consumer sentiment and untamed inflation that we said was not “temporary” (as the Fed has claimed), cast doubt on the U.S. economy’s future.
Also, consumers expect inflation to press the pedal harder, guessing that prices will rise 4.7 percent this year, compared to an expectation of 4.6 percent reported last month.
And while data released last week showed inflation slightly easing and retail sales rising in the U.S., the number of claims for unemployment benefits—a bellwether for layoffs—ticked up.
All three major indexes lost ground for the week, with the Dow Jones Industrial Average slipping 0.1 percent, NASDAQ down 0.3 percent, and the Standard & Poor’s 500 giving up 0.6 percent.
It was the S&P’s second consecutive losing week; the index fell a total of 2.3 percent, its largest two-week slide since the week ending 26 February this year.
Beyond inflation fears; beyond an overvalued artificially propped up with cheap money equity market at near record valuations that is long overdue for a sharp correction; plus the Delta variant hysteria, vax-passport mandates and other restrictions that will slow economic growth… market players have their eyes on China where the embattled debt-burdened giant property developer Evergrande Group is ready to implode. Of any publicly traded real-estate development company in the world, Evergrande is #1… saddled with the largest debt burden in the world.
Market Correction? It’s Official!
Yesterday Morgan Stanley’s research note predicted the Standard & Poor’s 500 stock index is likely to plummet at least 20 percent.
The report sketches two scenarios for U.S. equities, one the analysts call “fire,” the other “ice.”
“The typical ‘fire’ outcome would lead to a modest and healthy 10-percent correction in the S&P 500,” they wrote, with the U.S. Federal Reserve dismantling its stimulus props to keep the economy from running too hot.
In an “ice” future, the S&P would plunge by at least 20 percent.
“Will it be fire or ice? We don’t know,” the analysts wrote, “but the ice scenario would be worse for markets and we are leaning in that direction,” due in part to slowing growth and declining consumer confidence, according to recent polls.
“We think the mid-cycle transition will end with the rolling correction finally hitting the S&P 500,” they said.
Morgan Stanley is not alone in its increasingly sour outlook. Researchers at Citigroup and Goldman Sachs also have made public their views that economic shocks could send the markets tumbling.
TREND FORECAST: It’s an old truism that stock markets buy on hope and sell on fear. In other words, strong moves in the markets are fueled more by emotions than facts.
Consequently, negative conjectures such as Morgan Stanley’s can ignite fears that lead to the sell-off that Morgan is theorizing about.
With markets teetering near all-time highs with scant fundamentals to support those valuations, we continue our forecast, repeated again in our Market Overview on 21 June, 2021, to predict that equities are indeed likely to drop 20 percent before this year is over, taking the U.S. economy down with them.
Yesterday, the Dow fell 972 points before recovering some of the loss and closing down 614 points. The S&P slumped 1.7 percent and the tech-heavy Nasdaq slid 2.2 percent.
Feeling the Evergrande Group heat, the Hang Seng, falling 3.3 percent, hit an October 2020 low, while the Stoxx Europe 600 slid 1.7 percent.
Heng Seng moved up .51 percent today, but still worried about the Evergrande fallout, Japan’s Nikkei 225 fell 2.17 percent.
On the news that the U.S. was opening its borders to U.K. and European travelers who are fully vaxxed, the pan-European Stoxx 600 index closed up 0.9 percent.
In the U.S. today, with no strong data or solid economic news to push stock prices higher, the Dow opened up on a high note, soaring over 300 points on hopes that the Fed won’t announce an interest rate hike or tapering until November.
Before noon, the Dow slumped into negative territory, then rose some 200 points. But by the end of the day the Dow closed down some 50 points. The S&P slipped 0.08 percent and the Nasdaq finished the day up 0.22 percent.
While we study the facts and make our trend forecasts based on market fundamentals, those, as noted by Gregory Mannerino, are aberrations. In his article, “IS A MARKET CORRECTION POSSIBLE?”, he notes that “Today there is no resemblance of a free market system. Today we have a managed market being run by a runaway central bank. The fact is that the Fed is running the show, and the Fed IS the government.
GOLD/SILVER: Despite equites sinking, economies slowing, inflation rates rising and Delta variant fear spreading, both precious metals fell sharply last week. Moving up yesterday, the upswing continued as the safe-haven assets had a bit of a boost with gold up some $11.50 cents per ounce to close at $1,775 per ounce, and silver was up 1.33 percent to close the day at $22.50 per ounce.
Again, as Gregory Mannarino notes, in a world that has “no resemblance of a free market system,” and when crime syndicates such as JPMorgan Chase rig the precious metals markets (See, “DON’T CALL THEM ‘CRIMINALS’ – THEY’RE ‘WHITE SHOE BOYS’!”)… facts don’t matter.
Thus, we had, and continue to forecast that gold and silver prices should be much higher. However, we maintain that there will be prolonged pressure in the Bankster/Money Junkie world to keep equity markets rising and keep precious metal prices down.
Why? Because when markets crash and precious metals spike, it will signal to an out-of-touch Main Street the true calamity of the deeply in-debt public and private sectors who have artificially inflated economies and equities.
Indeed, a front page article in yesterday’s The Wall Street Journal illustrated just one aspect of the soaring debt levels and gambler’s addictions: “Junk-Debt Sales Soar Toward Record Year.”
That’s right…JUNK! The Journal notes that according to S&P Global Market Intelligence, junk rated bond debt now tops the previous 2008 high.
Yes, 2008, as in the Panic of ’08.
And then, like now, it was a totally rigged game that enriched the Bankster and Money Junkie mobs while shafting the general public. And as we have noted, middle class Americans had their steepest earning decline in 2020 since the government began tracking the data.
Also, while the billionaires got $8 trillion richer in 2020, poverty rates in the U.S. had their biggest increase in a single year since the government began tracking poverty in 1960.
OIL: Despite the shaky equities markets and signs of an economic slowdown, Brent Crude was up 0.66 percent, closing at 74.41 per barrel and West Texas Intermediate move up 0.31 to close at 70.51 as we go to press… over growing concerns of U.S. production from the damage caused by Hurricane Ida three weeks ago. According to the Bureau of Safety and Environmental Enforcement (BSEE), some 18 percent of U.S. oil and 27 percent of its natural gas production in the Gulf still remained offline.
Thus, as we have been reporting, with oil prices just a few dollars below their year high and natural gas prices spiking, inflation will continue to rise and the higher prices will hit the working class citizens of Slavelandia the hardest.
BITCOIN: While the coin had some volatile moves over the past several weeks, climbing above $50K per coin and hitting the low $40,000 per coin range, it was still trading in the $46,000-$47,000 per coin range.
Yesterday, bitcoin fell some 10 percent pushing it down to the $43K range.
Today, as we go to press, the slide is still on with the crypto currency selling at $41,849.
Why are the crypto prices across the board declining?
Some blame it on the Evergrande meltdown situation in China, others say they are waiting to see what the Fed will detail following today’s meeting, while still others blame people taking money out of crypto currencies to cover their losses in the equity markets.
Again, being that from the beginning it is a highly speculative market built on digital platforms of no hard assets, it is a gamblers game.
Thus, we maintain our forecast for Bitcoin to dive deeply if it goes below $25,500 per coin and rise sharply if it breaks strongly above $50K per coin and steadily maintains the above mid-$50K range.
We also maintain our forecast that a major factor in forecasting the future price of bitcoin and other crypto currencies is dependent on government regulations. Thus, the more regulation, the lower the value of the coins, the less regulation, the higher the prices rise, especially as more small time traders keep jumping into the crypto market.
For more on bitcoin and other cryptocurrencies, please see our “TRENDS IN CRYPTOS” section.