Hello again fellow space travelers!
I have not abandoned you, just been dealing with Mom issues so that’s eating up a tad more time than I thought it would but she’s my mother so everyone else gets to fall in line.
The markets for May can be summed up in one word:
Not even a capital “meh” just meh. As in bland. Listless. No volume. No commitment. Big moves like this past Friday’s Dow +700 on one of the worst volume days in memory. Breadth is still just marginal at best and there appears there might be a follow through fake out, but the reality is that those of us who are of the historian type have seen this movie before.
And the ending sucks.
First off, here is where we are today in the Nasdaq Composite:
Yes, Cramer actually did say something like that on Friday’s show:
The FinTwit (Financial Twitter) crowd seems to think that we are paralleling this era:
I tend to disagree. The main reason is that the government via the FDIC and Fed have indicated that “this time” they will not allow any more major banks to fail unlike the 2007-2008 fiasco. So inflating to death will be the answer. So while a recession might occur, it may not be as severe as the Fed might just well panic heading into the 2024 election to save face.
Thus why this era, where an economic recovery from a recession was underway along with a revolution in technology began, is why I think this time frame is the best analogy to equity markets at this moment:
The recession will proceed with demand collapsing, inflation finally contracting substantively in Q4, especially in the services arena, followed by a long pause in Fed policy actions other than any bailouts as needed of troubled financial institutions.
If I am correct, a 30-40% correction is not insane followed by a massive rally into the 2024 election except this time the script is flipped on the Democrats with the Republicans primed to gain the advantage unless they nominate another old man like Biden. If this happens along with the robotics and AI revolution taking hold late in 2024, odds are the Nasdaq and markets as a whole could head for all time highs.
Have no fear bears, there is plenty of time for the US leadership at both the Fed and in our government to make things a lot worse. In the interim however, it looks like a juicy set up for some serious gains if one is patient and willing to play the short side of the market later this summer.