If true the timing of such reversal is useless. Does it signal a major reversal is coming? Maybe.
How did it do with such external events like a Pandemic? I cringe at the ability of investors to rely on signals instead of common sense.
Where are we today? Inflation is NOT going away and in fact shows signs it is about to move higher still. Economics 101, the basic framework of all analysis is the labor market. Tight with no signs of weakening. Wage pressure ALWAYS results. Spending at times of change. Well we have stronger than expected consumer spending still even as big ticket items are being ignored. The bond market is telling us inflation is NOT reversing towards the past 40 years of disinflation. In fact they keep rising once again despite the so called debt ceiling deal.
External events like a pandemic was a no-brainer for me but obviously not the market. it took them 5 weeks and an actual death on US soil for it to reverse big time. So FORGET about signs, technical readings, and other built in mechanisms. Inflation is stubborn and persistent, and an implosive GOP can easily plunge this market immediately down 30 percent.
Main focus today: Easy, debt ceiling agreement. I highly doubt it would pass from the Republican side. Their secretive last minute deal was proof of their concerns. We only have a few days this week to fond out if it does get passed. No deal means an immediate PLUNGE!
An easy no-brainer call! A default will plunge this economy and market into chaos. With a deal we extend the bullish move till INFLATION will prove to be similar to the early 80's. A One trillion dollar gamble by banks is jus the start of the problem. The Street is desperate for a rate CUT in 2023. The number of institutions across a large asset class will default on their obligations betting deflation is back.
Like a Pandemic and Debt Crisis all external events come upon us like a hidden Tiger. We have 2 immediate problems lurking. One the Debt ceiling and we will know before the end of this week. the other is INFLATION and the data starting by end of this week will verify these concerns.
BOTH of these events are at a point where either one can trigger a crash scenario since it seems to be ignored with current assumptions and prices.
