We now forecast that the turbulence hitting Wall Street and rattling equity markets worldwide, signals the beginning of the end of the Trump Rally. Stock prices may go higher, but the long-term trend lines are heading lower…
Yes, with the massive spending bill just passed by Washington at a time when the economy is solid and stimulus is not needed – coupled with President Trump’s bountiful tax breaks to corporations, whose earnings are already robust – there will be more money to gamble in the markets.
Further, Trump’s generous tax plan, which also allows corporations to repatriate cash stored in overseas banks, will empower companies to buy-back their own stocks, thus stabilizing, and even pushing markets higher.
However, with price-earnings ratios near the high end of their ranges by historical standards, and markets highly overleveraged with Exchange-Traded-Funds and money flowing out of managed funds and into index funds, the gambling fever that drove the Dow up 45 percent since the Trump election is not sustainable.
Indeed, so over-valued and over-leveraged are the markets, that all it took to send global equities into a tailspin recently was the slightest whisper of rising inflation and higher interest rates following a somewhat favorable US jobs report.
And now, with the latest US Consumer Price Index rising more than expected, those higher inflation/higher interest rate fears, i.e. less cheap money to juice the markets, stocks will trend lower.
- Source, Gerald Celente via King World News
