Last week, the Dow closed at a record high and so did the S&P 500, which closed at 4,128.80, its 20th record high this year.
For the first time in six months, the index showed gains for three consecutive weeks. Its 2.7-percent growth for the week was its one-week best since early February.
The Dow Jones Industrial Average added 297 points on Friday, ending the day at 33,800.60 and rising 2 percent for the week. The NASDAQ grew by 70 points, a 3.1-percent step.
Tech stocks won big, with Twitter up 12 percent on the week; Apple rose 8.1 percent.
The market’s rise was broad across most sectors with money junkies betting that the trillions of dollars pumped into the economy by Washington and a successful vaccine campaign will drive the U.S. economy to a permanent recovery.
That was last week.
Today, the Dow was down just 68 points on the news that the Johnson & Johnson jab was put on pause as several people who had gotten the vaccine are suffering from dangerous blood clots, but that didn’t’ stop the S&P 500 to close at another record high while the NASDAQ climbed 1 percent.
Indeed, as we report in the Trends Journal, nations are reassessing the vaccine policies as more people suffer serious side effects from various vaccines.
Considering the powers that be which are in charge and how the government, media, and “celebrities” are pumping the “get jabbed and live happily ever after” campaign, any suspensions will be temporary, and the vaccine crusade will continue unabated.
In fact, the “experts” are spreading the word that the vaccines may last for only several months and yearly shots will be required to win the COVID War.
Thus, the markets’ rise and fall will be determined by greater forces than vaccine rates… such as interest rates.
As we have been forecasting, inflation rates will increase, which in turn will put pressure on the Federal Reserve to raise interest rates. When interest rates rise and the flow of cheap monetary methadone dries up, the equity markets will crash, and so, too, will the global economy.
Today, the U.S. Department of Labor announced that the consumer price index rose 0.6 percent in March from the previous month, pushing the rate up 2.6 percent from a year ago.
The U.S. deficit in March was $660 billion, up 454 percent from a year ago. The government spent $927 billion, an increase of 161 percent and the third-highest total after June and April of last year according to the Wall Street Journal.
Overall, the U.S. budget deficit for the first half of the fiscal year spiked to a record $1.7 trillion… the highest levels since World War II. According to the Congressional Budget Office, the Federal debt for 2021 will hit 102 percent of GDP, which it hit only twice before in U.S. history – 1945 and 1946 – when the government went on a spending spree to fight World War II.
Thus, while Washington and the Feds say the low interest rates make the low debt-servicing costs affordable, when rates rise, so, too, will interest payments on the debt.
And again, across the spectrum, as the data proves, inflation is on the rise.
TREND FORECAST: Whether it is the reality of economic fundamentals of overvalued, over-speculated equities at record P/E ratios, a rise in interest rates, or a wild card event – be they manmade or made by Mother nature – we maintain our forecast for a sharp market correction this year.
TRENDPOST: The S&P 500 stock index has set 17 record highs so far this year and topped the 4,000 mark for the first time. But the markets’ relentless ascent masks some jarring swings, both up and down, in the valuation of individual companies, a study by Bank of America (BOA) has found.
The study found the 50 largest spikes or plunges in value reached a scale similar to that during 2020’s first quarter when markets were roiled by the COVID pandemic and resulting global economic shutdown.
Apple added $265 billion in market value in just the five sessions ahead of its most recent earnings report – more than the entire market capitalization of Coca-Cola, the Wall Street Journal noted.
PayPal and chip-maker Nvidia each shed $56 billion over a few trading days last month.
Some analysts attribute these stock-specific rollercoasters to the rising popularity of momentum on “me too” stocks, which investors buy or sell as they see others do the same.
The sudden shifts also could be explained by an absence of a large number of buyers or sellers for a given stock, other observers have theorized.
The shifts also are buffeting entire market sectors.
Energy stocks, the markets’ biggest losers in 2020, have soared this year; tech stocks, last year’s stock market darlings, slumped this year as interest rates began to rise.
“Markets are a lot more unstable than meets the eye,” Benjamin Bowler, head of BOA’s equity derivatives research, commented to the WSJ.
Gold: With the dollar weakening and inflation rising, a scenario we have long been forecasting, gold went up $17 to close at $1,744 per ounce and silver climbed some 2 percent to close at $25.41 per ounce.
TREND FORECAST: We maintain our forecast that gold’s low breakout point is $1,650 per ounce. Should it hit that level, the downside risk is around $1,550 per ounce.
As for silver, should it break below $22 per ounce, the downside risk is in the $17 per ounce range.
Considering silver is the most efficient conductor of electricity, and it has a strategic demand in both hi-tech and heavy industry, we do not forecast it will break below that range.
We also maintain our forecast for gold to break above $2,100 per ounce this year and silver to move above $50 per ounce.
Bitcoin: On the expectation of the stock market debut of the cryptocurrency exchange Coinbase, Bitcoin hit a record high, selling at $63,185 as we go to press.
While we remain bullish on the cryptocurrency markets, we also are forecasting that as central banks go digital, they will do what they can to lessen the competition. (See our 28 July 2020 article, “IT’S OFFICIAL: DIRTY CASH TO DIGITAL TRASH.”)
On Monday, for example, Jesse Powell, CEO of the bitcoin exchange Kraken, told CNBC there “could be some crackdown” on cryptocurrencies. As we have been reporting, central banksters such as ECB head Christine Lagarde and U.S. Treasury Secretary Janet Yellen have been warning that cryptocurrencies can be used for illicit transactions and money laundering.
Last Thursday, Peter Thiel, the billionaire co-founder of PayPal, urged the government for more cryptocurrency regulations. He said, “Even though I’m pro-crypto… I do wonder whether at this point, Bitcoin should also be thought of in part as a Chinese financial weapon against the U.S.”
TRENDPOST: As evidenced by the competition the current cryptocurrencies will face from central bankers, the Federal Reserve Bank of Boston in collaboration with the Massachusetts Institute of Technology will publish the first draft of computer code that eventually will create a digital dollar.
James Cunha, the Boston Fed’s senior vice president of Secure Payments and Financial Technology Research, told the Wall Street Journal the project will share the code for public comment to “understand what’s possible” and also “because we know many others are interested in the same questions around the globe.”
The developers are seeking a digital structure that optimizes speed, privacy, and security.
“We tried to throw out the norm and think differently about how to solve some of these problems,” Cunha said.
The Fed’s project comes, in part, as a response to private digital currencies such as Bitcoin but does not seek to simply copy what others have done, the Boston Fed’s staffers told the WSJ.
For example, the digital dollar will avoid the energy-intensive mining that marks many cryptocurrencies, they said.
The Fed will not release a digital currency solely on its own authority but will seek support from Congress, Fed chair Jerome Powell noted in comments cited by the WSJ.
As we have been reporting, central bank digital currencies (CBDCs) are under development by many countries as well as the European Union. China plans to introduce its version to the world at the 2022 Winter Olympics in Beijing.
The currencies “are an opportunity for central banks to offer a technologically advanced representation of central bank money for the digital economy,” Agustín Carstens, the Bank for International Settlements’ general manager, said in a 31 March speech cited by the WSJ.
CBDCs’ “crucial novelty,” he said, “is that [they] offer the unique characteristics of central bank money as safe, neutral, and final.”
TRENDPOST: On 5 April, Japan’s central bank announced it has begun a test of a digital currency.
The test, which will last through March 2022, involves the currency’s basic uses, such as the bank’s method of creating, storing, and issuing it; and mechanisms by which merchants would accept and redeem it.
After next March, the bank will enter a more detailed preparation for the currency’s launch, including tackling management and regulatory issues.
The second phase might include a market test with a limited number of consumers, merchants, and payment-service providers, the bank said.
No date has been projected for the digital yen’s commercial debut.
Central banks in China and the European Union are in various stages of planning and testing digital currencies, which will modernize their financial systems, speed domestic and international payments, and ward off private cryptocurrencies’ encroachment into national economies.
Oil: As per today’s inflation numbers, gasoline prices surged 9.1 percent. Up 22 percent year-to-date, it was the biggest contributor to the monthly gain.
It should also be noted that yesterday, Israeli Prime Minister Benjamin Netanyahu said he will not allow Iran to obtain nuclear capability and said “Israel will continue to defend itself against Iran’s aggression and terrorism.”
As for “terrorism,” Iran has blamed Israel for sabotaging its uranium enrichment facility in Natanz last weekend.
TREND FORECAST: Should military conflict break out in the Middle East between these nations, Crude oil, now trading at $64 a barrel, will spike well above $80. As evidenced by the current surge in gasoline prices, which accounted for about 50 percent of the U.S. Consumer Price Index spike, much higher oil prices will ignite inflation and crash equity markets and the global economy, which has been artificially propped up with government and central bank monetary methadone.
TRENDPOST: Also keeping oil prices high was last week’s oil production cut compromise agreement by the OPEC + oil nations.
Saudi Arabia wanted to maintain cutbacks until a global economic recovery was more certain; Russia claimed the world’s oil market already was undersupplied by two million barrels a day and the market was in danger of “overheating.”
Keeping production throttled back would boost prices but also choke off revenue needed by many of the cash-hungry nations that have been hit hard by the lockdowns.
