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Faltering Friday – We’re on the Road to Nowhere

  "Well, we know where we're goin' But we don't know where we've been And we know what we're knowin' But we can't say what we've seen We're on a road to nowhere Come on inside Takin' that ride to nowhere We'll take that ride" – Talking Heads Here we are again.   Two weeks ago (14th) , it was " Record-High Wednesday – Dow 33,600, S&P 4,140, Nasdaq 14,000 " and this morning we're at Dow 33,783, S&P 4,178 and Nasdaq 13,846.  Keep in mind that's AFTER another $2Tn in stimulus has been announced and AFTER the Fed pledged to keep the money flowing, AFTER all these " terrific " earnings reports and AFTER we got a GDP Report showing 6.4% growth.  What's wrong with this picture?   Certainly it's SOMETHING, right?  Perhaps my concerns about a slow Global recovery, massive debt, rising inflation and ridiculous market multiples might be valid?  Nah…   As long as the money keeps flowing, the markets should keep going higher – or at least maintain these highs.  In a "normal" year, the Market goes up 8% – that's the average, historic gains.  In a normal year, the Fed doesn't put $80Bn per month into the bond market and another $40Bn a month into banks (buying up their mortgages) and, in a normal year, the Government doesn't drop $2Tn per quarter into the economy and Biden has just proposed $4.2Tn in new spending over 5 years so $800Bn/12 = $66.6Bn/month from Uncle Joe going forward. That's a lot of money!  Of course, coming off last year's $6Tn in stimulus, this year's $2Tn in Q1 + maybe 6 months of $66.6Bn = $400Bn – we're only going to be at $3.8Tn in stimulus this year – including the Fed's $1.44Tn.  So, how will the economy do on "just" $3.8Tn in stimulus and, keep in mind, the big pop came already – the rest is a trickle.  They are trying to take the economy off life support and soon we'll start to see how it stands up on its own. As you can see from the chart on the left,        IN PROGRESS          
  "Well, we know where we're goin'
But we don't know where we've been
And we know what we're knowin'
But we can't say what we've seen
We're on a road to nowhere
Come on inside
Takin' that ride to nowhere
We'll take that ride" – Talking Heads

Here we are again. 

Two weeks ago (14th), it was "Record-High Wednesday – Dow 33,600, S&P 4,140, Nasdaq 14,000" and this morning we're at Dow 33,783, S&P 4,178 and Nasdaq 13,846.  Keep in mind that's AFTER another $2Tn in stimulus has been announced and AFTER the Fed pledged to keep the money flowing, AFTER all these "terrific" earnings reports and AFTER we got a GDP Report showing 6.4% growth.  What's wrong with this picture? 

Certainly it's SOMETHING, right?  Perhaps my concerns about a slow Global recovery, massive debt, rising inflation and ridiculous market multiples might be valid?  Nah…   As long as the money keeps flowing, the markets should keep going higher – or at least maintain these highs.  In a "normal" year, the Market goes up 8% – that's the average, historic gains.  In a normal year, the Fed doesn't put $80Bn per month into the bond market and another $40Bn a month into banks (buying up their mortgages) and, in a normal year, the Government doesn't drop $2Tn per quarter into the economy and Biden has just proposed $4.2Tn in new spending over 5 years so $800Bn/12 = $66.6Bn/month from Uncle Joe going forward.

The macroeconomic implications of Biden's $1.9 trillion fiscal packageThat's a lot of money!  Of course, coming off last year's $6Tn in stimulus, this year's $2Tn in Q1 + maybe 6 months of $66.6Bn = $400Bn – we're only going to be at $3.8Tn in stimulus this year – including the Fed's $1.44Tn.  So, how will the economy do on "just" $3.8Tn in stimulus and, keep in mind, the big pop came already – the rest is a trickle.  They are trying to take the economy off life support and soon we'll start to see how it stands up on its own.

As you can see from the chart on the left, 

 

 

 

IN PROGRESS

 

 

 

 

 

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