Donald Trump Predicts the Stock Market?
Who knows when the Ides of March will roll around for the stock market. Donald Trump seems to constantly praise the stock market as his own vehicle to his own greatness. Some Presidents in the past have alluded to the stock market, but they’ve never attributed their success to it. Trump on the other hand, is the first to tweet on any news of a market rise about how his own self-proclamation acts as a thrust to create new wealth for the American consumer.
Needless to say, it was the market makers and financial institutions that were trading amongst themselves to propel the market to unprecedented heights. Even the Central Banks feel immune to their own frailties because they are awash with liquidity. However, the real analysis comes with the self-realization that all asset classes are increasing while not a single one is decreasing. Once the sequence of uniformity establishes itself it stands to reason that the Central Banks can not have a fall in any asset class affecting their balance sheet.
The market pundits continue to form their own reasoning and stick to the notion that we’re all safe and invincible until the yield curve becomes inverted. Sure this has held true at certain points in history. For example, in 1998 the yield curve finally inverted and led to the stock market peaking two years later in March 2000 before stocks came tumbling down. Additionally, in 2006 the yield curve inverted and was followed with a stock market peak-out in October 2007 before its eventual downfall. That’s why these market pundits proclaim that we are invincible, however this is without the regard of record consumer debt levels and extreme levels of liquidity. Additionally, we have seen countless anomalies of declines of over -20% in 1962, 1976-1978, 1987, 1998, and 2011 without an inverted yield curve which therefore renders this theory obsolete.
The Central Banks and Federal Reserve have effectively wiped out all forms of price discovery that investors once used in predicting future market trends. If the economic cycle is destroyed then the Dow Theory is destroyed meaning the usual booms and busts of any asset class no longer exist. Even without wage growth or corporate growth, the rising market illusion continues to be sustained due to share buybacks in appeasing financial institutions. The real game theory is therefore illustrated through Trump’s proclamation of pumping the market and his perceived notion that corporate governance will invest their profits rather than accumulating wealth and building offshore accounts.
Game theory suggests that the common American who became a millionaire because of rising house prices believes the illusion will continue to prop up their real estate assets. However let’s say the consumer is awash with credit card debt, then this now becomes a maneuver of them touching their real estate assets for the purpose of playing the stock market. Therefore, we come to the conclusion that the yield curve is disassociated with future stock market trends and that the market has a high potential of tumbling without the actual fruition of an inverted yield curve.
If there’s a lack of volatility and fear in the market then the market will rise along with the swamp that is borrowing more liquidity to pound the market and increase its value. However because of the absence of fear in the market, the market assumes a passive role governed by an arbitrary delusion of higher asset prices.
Of course the corporate executives are first to pounce on easy money provided by the Central Banks. These executives are rewarded with their stock compensations, kickbacks, and all the crony infrastructure that aligns themselves with other executives looking to reach the top. They can expect the Fed’s dovish allegiance to prop up the market with the locked-on precision of Donald Trump’s mantra. These executives know that wage growth is an arbitrary tool that fails to meet the expectation of consumer spending habits. The spending habits of consumers are no different than these CEO executives that want their yachts and mansions.
If inflation doesn’t occur and the economy subsequently softens then the Fed will no longer hike interest rates as planned. This means a move where more of the swamp jumps on the bandwagon and re-mortgages their houses while obtaining more credit cards to play the market. The central bankers have to come to terms that the Dow Utilities Index lost over 10% of its value amidst the rising broad market. The Dow Utilities Index has entered a bear market and unless there’s more liquidity transferred to this asset then someone is wrong. If the utilities are not worrisome simply because there’s no fear in the broad market then the market will once again continue to increase as rising expectations dominate the agenda.
If the utilities are proven correct then the stock market should collapse, however this isn’t the case because Trump has played a pivotal role along with the Federal Reserve to prop up all asset classes regardless of current prices. Once the money dries up and becomes a block, the main focus for the institutions will be the hope that the swamp continues to hold the bag and finance their riches. However, if the consumer loses confidence with respect to rising debt levels then reality sets in whereby their assets will never meet their expectations. The Ides of March are not here yet, allow Trump to sustain his magic along with the Federal Reserve.
Thanks to Michael Abrowic for his contributions to this article.