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In a prelude to yesterday’s stock market plunge, stocks closed Friday below their Monday levels.
The S&P 500 and Dow Jones Industrial Average each lost 1 percent for the week; the NASDAQ was off 1.9 percent.
Equities sank on the news that inflation in June spiked 5.4 percent and surveys showing consumers losing a measure of confidence in the economy’s future, due largely to inflation’s speedy climb.
Energy, financial, and other “cyclical” stocks that benefit from the economy’s recovery drooped, with the small-cap Russell 2000 index losing 5.1 percent, its worst week since October, the WSJ noted.
Travel-related stocks also weakened under rising public concerns that the virulent Delta variant of the COVID virus could slow or halt travel once again.
Carnival Cruise share prices dropped 4.7 percent and Alaska Air 4 percent, ranking them among the S&P’s worst performers.
Foreign markets also sagged at the end of last week.
The Shanghai Composite Index lost 0.7 percent; Japan’s Nikkei 225 dipped 1 percent.
Biden Bounce Hits Bump
Yesterday, the downtrend accelerated for the reason we had forecast over a month ago: The Presstitutes, bureaucrats and politicians would be pumping up COVID War 2.0… “the highly contagious Delta variant.” Indeed, we have detailed the hysteria and realities of the new coronavirus strain in this and previous Trends Journals.
Thus, with the news blasting fear, and the big push to get more of the population vaccinated, expectations on The Street for a strong economic Biden bounce flattened.
On Monday, having its worst session since October, the Dow fell 725 points, closing down over 2 percent while Europe’s Stoxx 600 was down 2.3 percent. Yet, even with the strong selloff, the three major stock indexes were down only about 3 percent from their record highs. The S&P 500 gained some 15 percent this year and the Dow Industrials is up over 13 percent… all on the expectations of the Biden Bounce: cheap money fueling equities, real estate and retail.
Indeed—as evidenced by the soaring markets despite billions of lives and livelihoods destroyed in the year and a half since the COVID War was launched—in the world of Banksters and money junky gamblers, facts don’t matter… gamblers matter.
Happy Days are Here Again!
In less than 24 hours, the Delta variant fear vanished.
In a blink of an eye, it was a whole new equity world. Forget the news that had those airlines and cruise companies stock plummeting on fears the variant would cripple their business. Today, with the variant vanishing, American Airlines, Delta Airlines and Royal Caribbean which all lost some 4 percent yesterday, spiked 8 percent, 5 percent and 7 percent respectively.
And after falling over 700 points yesterday and registering its worst session since October, today the Dow was up 550 points, the S&P 500 gained 1.5 percent and the Nasdaq Composite rose 1.57 percent while the small-cap benchmark Russell 2000 index jumped 3.5 percent.
What’s Next?
And, while prices of many commodities got hit hard yesterday, but are bouncing back today, inflation is a key indicator of what’s next and what to expect. As we continue to note, the higher inflation goes, the higher interest rates will rise. And when the Fed rate climbs to the 1.5 percent range from near zero today, equites and real estate markets will deeply dive.
Where is inflation going? Some say up, others say down. Check out Gregory Mannarino’s article, “Expect Inflation to Rise Rapidly, Along with A New Feudal System.”
For years he has warned that an inflation tsunami was approaching, there was no way to stop it, and it would get much worse.
GOLD/SILVER: Gold prices moved a bit higher today at $1,807 per ounce… essentially sideways, it’s down some three dollars from last week. However, silver at $25 per ounce is down a dollar from last week and hit a more-than-three-month low today. Silver as we noted is used in both heavy industry and hi-tech. As forecasts for an economic slowdown persist, commodity prices have taken a sharp hit.
However, with the cryptocurrency market on a sharp downtrend, we forecast that the bets that were going into cryptocurrencies will move back into gold and silver as the predominant safe haven assets. And, with our forecasts for a bear equities market, with prices falling 20 percent or more, the deeper the stock markets fall, the higher precious metals prices will rise.
And so too, as inflation rises higher and currencies move lower, precious metals, a primary inflation hedge, will continue to move higher.
OIL: Expecting the economy to rapidly expand in the second half of the year and world oil demand to grow by 6.6 percent in 2021, OPEC+ made a deal on Sunday to increase supply by 400,000 barrels per day beginning 1 August.
Since timing is everything, they did it at the perfectly wrong time… since equities began to plunge as fears that the Delta variant would force more lockdowns. Thus, the more lockdowns the slower economic growth and the less demand for oil.
After plunging 7 percent yesterday and down some $7 from its recent high, Brent Crude edged up above $69 a barrel on reports of tight supply.
And while we have forecast rising inflation thus higher commodity prices, should much of the world lockdown again to fight the COVID War 2.0 “Delta variant,” inflation will decline in many commodity sectors as supply greatly outweighs demand.
TRENDPOST: Demand for gasoline, jet fuel, and industrial chemicals plummeted during 2020’s economic crash, bankrupting hundreds of small U.S. shale producers and other oil-related businesses.
Welcome to 2021.
The seasonal average volume of total U.S. oil-based products being produced—a gauge of consumption—soared to its highest level in the three decades for which the U.S. commerce department has kept records.
Gasoline and diesel fuel already had returned to pre-2020 levels; the new surge is fueled by makers of asphalt, lubricants, plastics, and non-fuel products, indicating that U.S. industry, and the economy in general, is on the mend.
This resurgent U.S. economy is shrinking the global oil supply even more, especially now that American oil companies are unable to raise money for new drilling (“Oil Production Predicted to Remain Weak This Year,” Trends Journal, 18 May, 2021).
Demand for jet fuel is still 24 percent less than in July 2019, although air travel is rebounding. That indicates even greater pressure is ahead for an already-undersupplied market.
U.S. oil production has averaged a little more than 11 million barrels a day this year, a level that will rise to 11.85 million by the end of this year, according to the U.S. Energy Information Administration; the country averaged 12.23 million barrels daily in 2019.
The country’s oil supply is so strained that earlier this month, the price of West Texas Intermediate crude rose closer to that of benchmark Brent crude than it had since last October.
Oil inventories at Cushing, Oklahoma, the delivery terminal for Nymex futures contracts, reached their smallest since March 2020.
BITCOIN: As we go to press, bitcoin is trading in the $29,000 range. And the lower cryptocurrency leader falls, other digital coins are dragging lower with it.
As we have been forecasting for years, the harder regulators around the world clamp down on cryptocurrencies, the lower the prices fall. And most recently China, Thailand, Japan and Canada have stepped up regulatory scrutiny on crypto mining and trading.
Therefore, we maintain our forecast that should Bitcoin fall in the mid to low $25,000 range it will plunge deeply into the teens and lower per coin.