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STOCKS CAP WILD WEEK WITH A GAIN, AND KEEP RISING
U.S. equity markets gyrated through last week but managed to close the stretch with a gain for two of the three indexes, ending a three-week downturn.
The late Friday rally was fueled by strong earnings reports by major companies. The biggest of the market pushers was Apple, which gained 7 percent after reporting record quarterly revenue and profits.
Earnings among other corporations have remained strong. About 78 percent of S&P-listed companies that have reported fourth-quarter earnings per share have beaten analysts’ predictions, FactSet reported.
The Dow Jones Industrial Average added 1.3 percent for the week, the Standard and Poor’s was up 0.8 percent, and the NASDAQ, burdened by its heavy concentration of tech stocks, closed the week flat after gaining 3 percent on Friday.
Markets have been roiled by the certainty that the U.S. Federal Reserve will begin to stop their cheap money flow that has juiced equities and the economy when they raise interest rates beginning next month.
Again, while the banksters and the Presstitutes keep blaming inflation on supply chain disruptions—while that is part of what is driving prices up—the major inflation drivers are governments’ and central banks’ unprecedented money pumping schemes and record-low interest rates.
TREND FORECAST: The Street estimates a maximum of five interest rate hikes this year with the first boost of 50 basis points. Should the Fed raise its benchmark short-term interest rates five times this year, it would bring the rate to 1.25 percentage points.
As we have noted, with inflation sharply rising, interest rates are actually in negative territory. For example, with December’s Consumer Price Index up 7 percent from a year ago, the real interest rate which is near zero, is actually deep in negative territory when inflation is taken into account.
Therefore we maintain our forecast that when interest rates hit above 1.5 percent to 2 percent, it will dramatically bring down equites, the economy and real estate markets.
And with its $30 trillion debt load, the higher interest rates rise, the more it will cost the U.S. to service its debt, which will in turn put downward pressure on the dollar.
Bankster Bullshit
As we keep noting, what the Fed does and says is a complete in-your-face scam.
Go back just six months ago, the word on The Street was that the Fed wouldn’t increase interest rates until 2023. That was based on the lie and/or stupidity from the Fed-Head, Jerome Powell, that inflation was only “temporary.” Bullshit that he and the other Banksters spread, including former Fed Head Janet Yellen, who is now the U.S. Treasury pawn.
Yes, a pawn. A former Fed Head is now in charge of the U.S. Treasury.
Conflict of interest?
Revolving door?
Both, as Wall Street on Parade documented today:
“Adding to a very long laundry list of questions about exactly whom the New York Fed serves, is the help-wanted ad that was posted four days ago. The ad is for a Financial Planning & Analysis Expert to work at the New York Fed’s headquarters in lower Manhattan. One part of the job description is this: ‘modeling of potential investment opportunities.’
The New York Fed is supposed to be implementing monetary policy on behalf of the United States as mandated by the Federal Open Market Committee (FOMC). As far as public FOMC records indicate, the New York Fed has not been assigned the job of seeking out ‘potential investment opportunities.’”
Con Artists
Notwithstanding the volatile market fluctuations where equites are spiking up and down several hundred points in a session, there has not been a peep from the Presstitutes about Fed’s Plunge Protection Team rigging the markets to keep from crashing.
While there have been recent upticks, major indexes are still below their recent high marks, with the S&P down about 8 percent from its peak.
But to put the downtick in perspective—despite the COVID War which has devastated the lives and livelihoods of hundreds of millions and destroyed economies and businesses across the globe—between March 2020 and 3 January, the S&P 500 stock index has soared 114 percent.
Also last Friday, U.S. government bonds sold well, pushing yields down from 1.807 percent on Thursday to 1.779 at the end of the week.
Bond yields fall as demand pushes bond prices up.
U.S. futures prices for natural gas jumped 8.3 percent to $4.64 per million British thermal units as weather forecasters warned that February could be colder than expected.
Overseas, the Europe Stoxx 600 gave up 1 percent last week, the Shanghai composite index shed 1.1 percent, and the Hang Seng index in Hong Kong dropped 1 percent.
Japan’s Nikkei 225 edged up 1 percent.
Yesterday and Today
Closing out the worst month since March 2020 (when the COVID War was fully launched in America), the S&P 500 climbed nearly 2 percent yesterday. The Dow, again wildly fluctuating, closed up 406 points… and the tech-heavy Nasdaq – that had been pushed down into correction territory as investors dump “growth” stocks – jumped 3.4 percent.
Today it was another more-of-the-same volatile day. Equities opened on a down note following data from the Institute for Supply Management showing inflation in the manufacturing sector surging last month, with prices climbing 7.9 points to 76.1 month over month, up from December’s reading of 68.2 percent.
The benchmark 10-year yield topped 1.8 percent following the latest ISM data.
Again, the higher inflation rises, the greater the fear that the Fed will aggressively raise interest rates and cut off the cheap money flow that has inflated Wall Street and Main Street.
On the manufacturing front, while still strong, there was a slight decline, with the ISM manufacturing index at 57.6, down from 58.8 in December. A reading above 50 percent represents expansion.
Keeping the up and down trading day trend going, the Dow, after muddling near zero and trading flat most of the day, ended up 273 points, the S&P rose 0.69 percent and the Nasdaq climbed up 0.75 percent.
TREND FORECAST: As we have forecast, look for the Fed to sharply raise rates this year and next and then lower them before the presidential election in 2024. They did it before under Ronald Reagan when inflation was skyrocketing, and they will do it again. Remember, the major interest of the general public is the bottom line: “It’s the economy, stupid.”
While this strategy will prove risky considering how overvalued markets are and how artificially equities and economies have been pumped up with cheap money flows by central banks and governments, what may keep economies and equities from dramatically crashing is the winding down of the COVID War… which we forecast will begin late March, mid-April.
With “Freedom” ringing, and COVID War restrictions lifted in many nations, states and cities, economies will gain strength as travel, hospitality, conventions, trade shows, entertainment, restaurants and other related sectors sharply spike.
Following up on our forecast, yesterday, Denver Mayor Michael Hancock declared that “this virus is something we are going to have to manage and learn to live with, and the city would end the requirement of wearing masks or proof of vaccine requirements to enter businesses:
“Following extensive discussions with our regional partners as well as current health advice and the downward trajectory of cases, positivity and hospitalizations, Denver will not be extending our public health order.
“So beginning Friday, people will no longer be required under the public health order to wear masks or show proof of vaccination for entry into a business in Denver.”
GOLD/SILVER: After spiking in recent weeks as equity markets were tanking and investors were seeking safe haven assets, with the markets rebounding, both precious metals are stuck back in their several month range.
Today, Gold moved up nearly $6 per ounce closing at $1,802 per ounce, while silver moved up 1.13 percent to close at $22.64 per ounce.
TREND FORECAST: We maintain our forecast that in the short term, precious metals will decline as interest rates rise, since interest rate hikes raise the opportunity cost of holding non-yielding bullion.
It is also expected that as interest rates move higher so too will the U.S. dollar. But today, gold moved higher as the dollar index slipped after the currency hit a 1-1/2-year high on Friday following expectations for sharp interest rate hikes by the Fed.
While the dollar is king now, as we note, and the media is ignoring, it will cost Washington much more to service the $30 trillion U.S. debt burden… which will in turn also put downward pressure on the U.S. dollar and push safe-haven assets such as gold, silver and bitcoin higher.
And beyond government debt, the higher interest rates rise, the heavier the business and personal debt loads grow. Thus, the higher the levels of defaults, the deeper the economy falls.
And the deeper it falls, the higher safe-haven assets will rise. Again, as we note in this and previous Trends Journals, the economy cannot run without cheap money.
Again, as a result of the cheap money drying up when interest rates go up, the economy and equity markets will sharply decline… which will in turn strongly drive up precious metals and some cryptocurrency prices as investors seek safe haven and alternative assets.
OIL: As we have been reporting and long forecasting, the higher tensions rise in the Middle East with Israel/Iran/Saudi Arabia/Yemen… the higher oil prices will rise.
And with war-talk tensions between Russia, U.S. and NATO over Ukraine having escalated, last Friday Brent Crude and West Texas Intermediate closed at $91.70 and $88.84 per barrel respectively… its highest levels since October 2014.
Combined with supply shortages, oil prices climbed some 17 percent in January.
Today, while still ranging at their seven-year high, oil prices slipped a bit on speculation OPEC+ will add more oil to the markets than expected and on expectations that U.S. oil inventories will rise. Brent Crude was down 0.10 percent to close at $89.35 per barrel and WTI was up 0.23 percent, closing at $88.35 per barrel.
TREND FORECAST: Military tensions in the Middle East and Ukraine will continue to be major factors that could spike oil prices above $100 per barrel.
The more war talk and military actions escalate, the higher oil prices will rise, which in turn will dramatically push inflation higher. As inflation spikes it will force central banks to radically raise interest rates to fight it… which will sharply drive down equity markets and economies as money becomes too expensive to borrow.
BITCOIN: Going back to 2021, bitcoin began the year around $33,000 per coin and hit a high of $69,000 in November. As we go to press bitcoin is at $38,791. Thus, while crypto’s by their nature are volatile, that is the “normal” of the cryptocurrency market. Yet, overall, the coins have dramatically spiked in price since they hit the markets at pennies some 13 years ago.
TREND FORECAST: While the mainstream media says cryptocurrencies are declining as fear of interest rates rise, we disagree. Cryptocurrency players are not of that breed. Interest rates—high or low—is not why they are buying cryptos. It is their belief in the market potential of a crypto world free of Big Brother and the Banksters.
As we have been noting for over five years, a major factor in forecasting the future price of bitcoin and other crypto currencies is dependent upon government regulations.
And last week, pushing prices lower, the U.S. Federal Reserve issued its study on the prospect of creating a digital dollar. Other nations also discussed taking measures that would restrict crypto growth.
We maintain our forecast that bitcoin will find strength to hit new highs when it breaks above $55,500 per coin. We had also forecast, the downward breakout point will be hit should prices fall below $25,000 per coin. If they go that low, bitcoin could well fall back to the $10,000 range.
(For more crypto trends and forecasts, please see our TRENDS IN CRYPTOS section.)