…..’Cause I’ve had the time of my life..and I owe it all to you..
The original song from Dirty Dancing is one of my all time favourites and somehow reminds me of the Global Markets performance this year.Every conceivable asset class (except cash) posted positive returns ,thanks to the LIQUIDITY provided by global central banks.The Fed is my view moved to implement the “ high pressure economy” regime outlined in former chair Janet Yellen’s 2014 speech at the Boston Fed Reserve bank https://www.federalreserve.gov/newsevents/speech/yellen20161014a.htm.
Indirecly this document suggest the US central Bank has returned to the Greenspan approach to bubbles- they will deal with the consequences once it pops.
The chart below explains the LIQUIDITY story.
Gone are the good old days when Earnings used to be tailwind for market valuations.
The polarising performance of US markets.
The two stocks, Apple and Microsoft, each having a market cap of USD 1 trillion have contributed the most to 2019’s total stock-market returns and also hold that position for the entire decade.
The number of Zombie companies continue to rise along with their market caps.
The above charts were examples of distortion created by excess pumping of money.
Jerome Powell raised the bar for raising rates significantly whereas the bar for lowering rates has gone down. More evidence that Central Bankers will tolerate higher inflation and low or negative real rates.
BOFA has a crystal ball and they see the endgame approaching .
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