There are a couple of trends that go counter towards go-go forecasts from recent tax cuts inside the U.S. C that can be obviously positive, a minimum of for that near term.
Stocks have loved this free gift from President Trump, but long-term statistics reveal that corporations will not increase capital investments when taxes fall.
They accomplish that if your economy grows plus they need more capacity, just isn’t the case currently at a low 75% capacity utilization. Or, they reduce such investments during recessions.
Historically, capital investments have trended at around 18% of GDP.
But to both leading indicators-
The first is the fact global quantitative easing is “easing.”
It’s been declining since March 2017. On of a 12- to 18-month lag, that could be negative with the U.S. and global economy. Ought to see this chart-
Note the non plus ultra improvement in QE at the beginning of 2009 forward as well as strong recovery that followed- as well as pullback at the begining of 2011 that saw a slowdown during the markets into late 2011.
Also note the slowdown from the Fed from the U.S. in 2014 that saw a slowdown throughout the market and stock markets into early 2016 for stocks.
Now that QE is at decline, if the indicator proves accurate, we’ve got to start to see a slowdown for the overall design between the earliest 1 / 2 of 2018 or even the summer with the latest. Virtually no one expects that and a solid expected Q1 GDP forecast will just make turn out to be story stronger for the present time.
This could mean an economic depression, that will mean an industry crash- or perhaps here we are at 2% growth and a substantial correction when 3% to 4% doesn’t materialize, as we’re warning it will not.
The second trend works with Bitcoin-
For sometime now I have been warning that Bitcoin could possibly be the pin that can prick this stock bubble, similar to internet stocks were the pin noisy . 2000.
Well, occurs there’s an approximate nine-week lag relating to the extreme late-stage Bitcoin bubble as well as Dow.
The recent peak in Bitcoin in mid- December 2017 indicate a potential top in stocks by mid- to late February or early March, with the latest. You’ll be able topping is put in on January 27.
So, we’ll be monitoring these indicators closely and will help keep you updated.
In this kind of artificial bubble, inflated by nothing but massive QE/money printing and now free-lunch tax cuts, most traditional indicators of an market top aren’t about to manifest.
These two new indicators could provide us with the warning we want.
The best confirmation would have been a convincing break with the bottom trend-line from the Nasdaq in its bearish wedge which i showed on January 24. This market did break that on February 9, but turned around and rallied. If it tests that line again, chances are it will break and we often this marketplace down 40% approximately by late April.
We’ll see within the in a few days or possibly even longer, but caution is warranted in this parabolic market.
P.S. Bitcoin’s bubble is bursting, presenting us with those sale-of-a-lifetime opportunities I take a look at so frequently. My team has found one particular opportunities particularly in the cryptocurrency space. I’ve pulled together the details available for you here.