Perspectives

TSP Charts: Going Parabolic

As investors come to realize that rising interest rates means poor returns on bonds over the next year or so, where will they re-allocate their funds to?  Hmmm…

SP500 index

17 Jan 2018 SP500

After the central banks removed 12 trillion in financial assets from the markets with money created out-of-thin-air.  And corporations bought trillions of their own stock with other people’s money (debt) thus reducing the supply of stocks on the market.  And retail investors decided to go all-passive and leave price setting to the marginal investors speculators.  And all those who shorted the markets losing everything or just giving up and no longer providing any resistance.

Now… NOW the stock market can launch into its *secular* bull market peak.  Well done central banks and Republicans.

The final move comes on the backs of record setting “all-in” allocations by retail and professional investors alike helped by one more round of tax-cut fueled corporate buybacks.

Just don’t ask what happens after that.  It’s never pretty and never the same.

And no, I do not see corporate revenue tripling from here to catch up with stock market prices.

And back to my first thought.  In an everything bubble, where does money flow when investors decide to exit bonds?

Speculators chase momentum and from what I see the SP500 has had momentum.  The fact that we have exceeded the 1929 and 2000 stock market bubble valuation levels does not matter to momentum chasers, or price-insensitive corporate CEOs & central banks.

So get some popcorn, it’s going to be an interesting year.

 


 

TSP & Vanguard Smart Investor

Categories: Perspectives, TSP Charts