WASHINGTON. Given the market’s current, scary sinking spell, everyone is asking three cosmic questions: Is the long-running secular bull market in U.S. stocks over? Is the Great Trump Rally within that secular bull market also kaput? And finally, are we in a bear market now?
The short term backstory that’s prompting these questions is actually crystal clear for investors – like me – who’ve watched the stocks in their portfolios tank big time since the October 2018 Texas Chainsaw Massacre of the bull market began.
We’ve just concluded the wildest Wall Street Week since… since… well, since the first quarter of 2018. At the moment, the Q1 2018 downdraft numbers and charts are still worse than what we’re seeing right now. But another week like the one we’ve just had will put the current market downdraft in first place.
Secular bull market and Great Trump Rally: Time to stick a fork in them?
To provide some tentative answers – or at least hints – to help address our cosmic questions, I’ve cruised through a number of investor sites, commentaries and charts to see what a few reliable, though occasionally quirky market sages have to say after all of us collapsed Friday evening in utter exhaustion and dismay.
Let’s open the discussion with an appropriately accurate, if earthy, general comment from Jesse of the commodities-centric site Jesse’s Café Americain.
“The spokesmodels, cheerleaders, and stock pimps were all smiles today as the equity indices were bouncing back hard.
“But alas, after the bell both Amazon and Alphabet, the behemoth formerly known as Google, shit the bed on their financial results, and the futures headed south with a vengeance.”
Jesse, of course, is referring to the severe battering Mr. Market dished out to the shares of Amazon (trading symbol: AMZN) and Alphabet’s Google Bobbsey Twins (GOOG and GOOGL). Yes, the enfeebled bull market made at least two attempts at a dead cat bounce Friday. But they both failed to prevail against continuing, overwhelming selling. Bad omen for the long-running bull and the Great Trump Rally.
Gloom and doom still loom
Jesse had more to say, as he elaborated on his theme. After affirming his previous, somewhat scatological observations, he provided more evidence for his gloomy view.
“Stocks came in plunging this morning after the shock results of the big lead sled dogs Amazon and Alphabet after the bell last night….
“There is still a decided lack of fear, signalling that there has been no capitulation bottom, despite the elevated VIX.
“As one of the spokesmodels sagely noted this morning as the Dow Industrials plunged, ‘this is just a little sell off.'”
Translation: Usually, the way these short term downdrafts – corrections, usually – end is with one horrendous, genuinely frightening tsunami of “sell everything” stock dumpage. This is also known in the trade as “puking.” It happens when everybody gives up on stocks at the same thing. This phenomenon, in turn, is more widely known as “capitulation.” It occurs with massively high trading volume. Until and unless capitulation occurs, the Great Trump Rally may not resume.
(BTW, love that term “spokesmodels.” I’ve been calling them “blowdries.” In reality, they’re actually NPCs.)
True, each selling wave we’ve experienced has occurred at higher volume. But old timers like me can’t help thinking that as bad as this is, even Friday’s nastiness didn’t seem like the end. No capitulation just yet.
Where to hide? Junk bonds or mattress money?
This brings up an important follow-up question. Since most of us no longer stuff semi-worthless dollar bills in our mattresses like our 1930s forebears allegedly did, where do we put the money that nasty Mr. Market has allowed us to keep until the storm blows over? Jesse addresses pretty much the same question. Sort of.
“Where are investors going for a safe haven trade? High Yield ‘Junk’ Bonds. You can’t make this stuff up.
“This is just the first course in a banquet of consequences….
“The Fed is still likely to take another rate increase in December, unless the markets completely fall out of bed. The Fed is raising rates for its own purposes, to get off ZIRP [zero interest rate policy] and give themselves some policy room when this latest asset bubble they created blows up.”
A notable pessimist and essentially a socialist, Jesse is notably cheerless when analyzing markets he hasn’t liked since at least 2007. Or the Fed’s actions during and after that time for that matter. Who can blame him? As President Obama and the Democrat-led Congress abdicated their economic responsibilities over a decade ago, the Fed was the only player left at the table. So the Fed furiously improvised to save the dollar and the American banking system, which, in fact, is the Fed’s essential mission.
But, given zero cooperation from elected officials and their legion of minions, no real, effective recovery program was ever launched, aside from the administration’s “stimulus” plan, which was actually nothing more than a massive chunk of income redistribution that went to trade unions and radical women’s group causes. John Q. Public and Joe Sixpack never got a break. Why can’t they have a secular bull market that helps them, too. Just like the rich guys?
Is the Federal Reserve screwing up Trump’s recovery for The Rest of Us?
Short answer: I’m beginning to think so. Whether intentionally or not, I don’t currently know.
What I do know is this. Today we have a president who’s trying to address the needs of those legions of Lost Americans left stranded in Flyover Country since the dawn of the Great Recession. But surprise! The Fed is now using a heavy hand to quickly jack interest rates back to “normal.” I.e.,to a level where they sat a few years prior to the Great Recession.
Except that they’re forgetting one thing. Banks, insurance companies and all those “Democratic-Socialists” lecturing the rest of us about “privilege” got all their money years ago. Plus a whole lot more. Everybody else, aka, The Deplorables, are still trying to get back to even. Why pull the punchbowl away from honest, average American workers now? Like, where’s all the inflation, dudes? Why stick a dagger in the secular bull market and the Great Trump Rally? And why do it just when the rest of us were recovering?
Jesse is probably talking about a different kind of “banquet of consequences” than I am. That said, the Fed’s relentless curtailment of a genuine People’s Recovery is not going to end well. They’re apparently jacking up rates so they can reduce them again when their tactics inevitably cause a recession. The markets have begun to fear this more than pretty much everything else.
So do I. I believe that most of the Yale- and Harvard-educated elites running Washington actually possess near zero intelligence and common sense. That scraggly dude pushing a Safeway cart around Foggy Bottom, D.C. is probably smarter.
Next: Bear market fears add to October angst, fear and selling panic on Wall Street.