Investors are bullish. The Federal Reserve has persuaded them that even though interest rates have totally killed housing and other interest-rate-sensitive industries as a whole, the U.S. economy is booming thanks to massive reindustrialization in post-China/U.S. trade-led globalization.
Yes, it’s inflationary. Yes, it’s hurting the people at the bottom most. But they argue that the country is doing very well in the big picture, and everyone will enjoy the fruits of job creation.
Hedge fund managers agree with this thesis. After exhibiting the worst bearishness in history over Powell’s hawkishness, sentiment has strongly rebounded.
Courtesy: Zerohedge.com
I used the term “touch-and-go landing” about 18 months ago to explain why the market is pricing in a hard landing, but the truth is that the plane is implementing what’s called a “touch-and-go maneuver.” This is when the plane nearing the landing strip briefly touches it only to immediately throttle all the way and go back up to the skies without ever intending to land.
It looks like the plane is clearly landing to non-experts, but astute thinkers and aviation gurus can recognize the maneuver and plan accordingly.
I was a heavy buyer of equities from June through October 2022, and that will turn out to be a historic decision.
Today, I want to show you that the probability of a recession in the United States is close to zero.
Courtesy: Zerohedge.com
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Do I agree with this probability that the hedge fund managers believe is all but gone? I do.
What could change it are high triple-digit oil prices. Because of the Biden administration’s draining of strategic petroleum reserves, this would put the U.S. economy in a place that isn’t ideal, to say the least.
Oil prices are critical for the voter, so if the Biden administration sees this as a threat, it might act forcefully and actually make the situation worse.
I think Washington will cut down oil prices if they rise over $100/barrel. Regarding all other inflationary concerns, I believe Biden will shut his trap and let Powell wiggle and drown in the swamp by himself.
Biden will throw Powell under the bus.
Courtesy: Zerohedge.com
As you can see, bets on lower rates fueled a mania in interest-rate-sensitive stocks in December 2023, but it was premature.
As I’ve explained many times, the United States is going through a period of higher inflation that might remain with us until 2027 to 2029.
It has to do with the rapid industrialization of infrastructure needed for the build-up of artificial intelligence supremacy along with other competitive considerations that corporate America is prioritizing.
The U.S. economy is entering a boom period, and it will include massive parts of the economy. At the same time, there is a clear and unmistakable attempt to see how interested the U.S. is in going deeper into debt for the sake of holding back Russia, China, and Iran, three powers that seek to simultaneously challenge American allies.
It is quite clear that the United States doesn’t want to fully engage but rather spread the burden among its allies while bringing back an age of regional globalization instead of hyper-globalization.
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