Despite our apparent recovery to begin the week overseas markets got spooked following Friday’s drubbing and began the week with additional losses as bond yields spiked. Usually stock and bond markets move in opposite directions with capital flowing away from risk as stock markets fall and into safer havens like bonds pushing prices up and yields down in the process. Reversing direction as investors chase risk looking for better returns. This relationship like so many others of late seems to have broken down making it much more challenging than usual to invest effectively as the markets seem to be much more influenced by bankster whim than actual data. The 6th consecutive quarterly decline in earnings as the markets achieved new record highs is a stunning case in point as historically a 3rd consecutive reduction has produced a bear market drop of 20%+ 82% of the time along with a dramatic reduction in business capital expenditures shortly thereafter usually triggering a recession as it goes. Yet 6 and counting along with rising valuations and nothing matters.
Like the 3-odd years of endless Fed chatter about higher interest rates after they have painted themselves and most everyone else into a record debt corner the economy muddles along struggling to maintain 2% economic growth a figure that has fallen to 1% of late and that with emergency level interest rates. Talk they might but higher interest rates are a non-starter unless you don’t mind another recession.