The COVID War. It’s a gambler’s dream. On the “upbeat” news that in 2020, the U.K. registered its worst economic contraction in 300 years, last week the British pound climbed to its highest level since 2018.
Today, Statistics Canada reported that the Canadian dollar shrank 5.4 percent in 2020, posting its steepest annual decline since comparable data was first recorded in 1961. Looking ahead to January, Statistics estimates 0.5 percent economic growth.
In India, a nation that was suffering several years of contracting GDP before the COVID War broke out in 2020 – and whose economy is set for its biggest annual contraction since 1952, falling 7.7 percent in the financial year ending March 2022 – saw its Sensex stock index spike up 22 percent this year. According to UBS, Indian equities are at about 24 times the next year’s earnings, and the Sensex is more highly valued than the S&P 500.
On the “good” news in the U.S., with tens of thousands of businesses going bust – airline, hospitality, convention, trade show, restaurant revenues plummeting – big cities emptying out, commercial real estate and mall values plummeting, and 8.6 million fewer employed than there were a year ago… last week, the major stock indexes ranked record high.
Riding the crest of expectations that the economy will surge fueled by COVID vaccinations, pent-up consumer demand, and assurances from the Federal Reserve that it will keep interest rates low and the reality that Washington will pump some $2 trillion into the pockets of consumers and businesses to prop up the economy… the Dow zoomed 424 points to a record 31,961.86 on 24 February.
Last Thursday and Friday, the Dow lost nearly 1,000 points as 10-year yields spiked. Can the Fed step in to again rescue the markets and keep the artificially propped up? What will they do? Read Gregory Mannarino’s new article, “THE FED’S SILENT WAR TO GAIN MORE CONTROL.”
Yesterday, the same day the American Journal of Public Health reported that over 30,000 Americans have died due to pandemic-related unemployment, stocks surged, boosting the S&P 500 to its best day in nine months.
Today, the Dow was up most of the day but closed down 144 points, while hi-flying tech stocks Apple, Facebook, Amazon, and Microsoft slid down, and Tesla dropped 4.5 percent, pushing the NASDAQ down 1.7 percent, while the S&P 500 fell 0.8 percent
Biden Bounce
As the cover of this week’s Trends Journal illustrates, much of the world, particularly the young people, are ready to bust out, break loose, party, and spend their way to happiness. As we have reported in this issue, states across the nation are going to be fully opened. Indeed, as we go to press, Texas announced it’s back to business as usual.
While life won’t instantly go back to pre-COVID War normal, a new round of explosion will temporarily boost economies for months to come. Yesterday, the Institute for Supply Management reported manufacturing data had it highest growth level since August 2018.
Today, the Atlanta Federal Reserve estimates that first-quarter U.S. GDP will spike 10 percent.
TREND FORECAST: As we at the Trends Journal and Gregory Mannarino attest, stock prices are detached from underlying economic realities. Prices are blown to the winds of hopes and fears, which can reverse direction in a day, as last week’s market swings show. The Dow was down over 1,000 points in two days, and, in two weeks, the tech-heavy NASDAQ fell 7 percent. Thus, the prospects for sharp selloffs persist.
We maintain our forecast that central banks will keep interest rates low, keep buying up bonds and invent more quantitative easing measures, and government stimulus will artificially inflate both equities and economies. However, when the monetary methadone injections dry up and the Wall Street money junkies can’t get their fix, the markets will crash and Main Street will sink deeply into the “Greatest Depression.”
We continue to forecast the stock bubble will burst before the year’s end.
Beyond equities, the high-flying real estate markets that showed listing prices up 14.5 percent year-to-date – registering 28 consecutive weeks of double-digit price gains according to Realtor.com – will also move downward. As for commercial real estate, condominiums and apartment rentals in large cities that have witnessed declining populations, as people move to suburban and ex-urban areas, will sharply fall in value.
GOLD. In early trading today, gold dropped to $1,706 per ounce, hitting its lowest level since last June before rebounding to close at $1,734 per ounce. After falling to a one-month low, silver was up 18 cents, closing at $26.78 per ounce.
TREND FORECAST: We maintain our forecast that while bullion is down sharply this year, the combinations of massive money printing; deepening budget deficits’ corporations piling on of massive debt loads; and the artificially-propped up equity markets bubble that will eventually burst, plus rising inflation; gold prices will top $2,100 per ounce, and silver will push above $50 per ounce.
OIL. Down some $5.00 since last week’s high, Brent Crude closed down 1.87 percent at $62.50 per barrel, and West Texas Intermediate was off 1.78 percent closing at 59.56 per barrel.
TREND FORECAST: With tensions heating up in the Middle East, as we have detailed in this and other Trends Journals, should military actions escalate between the United States, Israel, and Saudi Arabia against Iran, oil prices will spike sharply higher. This in turn will push inflation higher along with safe-haven gold and silver assets.
BITCOIN. After hitting a high of $58,341, Bitcoin sank over 10 percent last week. After bouncing back a bit, as we go to press, the cryptocurrency is selling for $47,445.
Some of the downward pressure was from a statement by New York Attorney General Letitia James who warned buyers to beware of scams and to use “extreme caution” when buying cryptocurrencies.
TREND FORECAST: How low can Bitcoin go? How far can it fall? We maintain our 5 January forecast: “The downward breakout point will be hit should the price fall below $25,000 per coin.”
