At this juncture, for
the current decline to end up being more than a steep correction in an ongoing
bull market there’d
have to be a willingness on the parts of Trump and Xi to together bring on the next global recession. And, in Trump’s case
(Xi is president for life), to see his political career end in the most unflattering
fashion (yes, recessions murder political careers).
As it
stands, the trajectory of the data looks markedly better than it did during the
2011 correction (S&P -19%) and on balance
better than the back to back late 2015, early 2016 corrections (-10% and -12%
respectively). Therefore, odds, at the moment (always subject to change), suggest
that this is one of those necessary pauses that refresh in what is an aging
bull market.
The
good news is that bull markets never die of old age: They typically die under the weight of cyclical excesses (like tech in
90s and mortgages/real estate in the 00s), historically high stock valuations (like
the 90s), a subtle rolling over of macro conditions (like both), and a state of
blind investor euphoria (like both).
Those
are clearly not the conditions we’re currently
facing…
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