The Beginning Of Our Last Recession Is Now 12 Years Ago. Is This Important?

I don’t mean to be one of those people who has predicted 19 of the past 2 recessions, but a lot changed in the stock market over the past week that has me thinking this is not the dip to buy.

Here’s the skinny:

FED JAWBONING:

First we Fed Chair Jerome Powell cut interest rates last week, with his statement punctuated with a “don’t get used to this” tone. Trump has been openly hateful of this man since maybe a day after he hired him, so this is literally two childish people duking it out in the public eye…meanwhile to the detriment of the US, since they’re both emotional decision makers in this instance.

Immediately Trump retaliates [ok, he did wait like 14 minutes] to arch-nemesis Powell’s statement with a 10% tariff on Chinese goods. This essentially killed the momentum we took for granted in the moment.

MACRO FACTORS:

A collapse in the momentum in the SOXX semiconductor index despite a weaker dollar. The peak and drop in semiconductors came days BEFORE the Federal Reserve announcement.

A drop in the Dollar Index [dollar strength, in effect].

An accelerated (beta positive) drop in momentum/FANG/FAANG stocks. This just means these stocks fell a bigger percentage than the overall market.

A collapse in oil prices after Trump’s retaliatory tariff announcement. This is a big deal. A weaker dollar SHOULD push oil up. Unless you think there is a slowdown in demand coming.

A rise in the price of gold and silver starting Friday, and NO rise in oil rising [safe haven commodities buying]…because it is a consumer good.

China devaluing the Yuan immediately after all of this, MORETHAN EXPECTED, essentially negating the tariffs Trump imposed – while simultaneously pushing investors out of stocks and into gold and silver. This is called TINA – “there is no alternative” – basically knee jerk reactionary buying of safe haven assets.

Relief rallies weaker than sell-offs. The Dow has not closed back above 26,000, and the S&P has not closed above 2,900.

CONCLUSION:

This is the most controversial thing I will say: 2007 was 12 years ago.

Great math Nick! I know. But that’s not the point. The point is, even if the bull market started in 2013 [that’s when market broke above ALL TIME HIGHS,] who says a bull market can’t end at 6 years, rather than the usual 8 years? The 8 year number metric is just a lazy way of assuming we get a boom and bust every 2 presidential elections.

Here’s my rationale.

If Amazon has smoothed the business cycle by making all of its goods available year-round, and the 5-day shipping ‘norm’ has become 2-day shipping…why can’t the duration of a bull market also be shorter? We had a 19.9999999% drawdown before new years, and the recovery took months rather than years. Why can’t business cycles be shorter now, now that the internet has accelerated every aspect of transactions?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Releated

Facebook to Compete with Bitcoin?

Facebook is slated to release its own cryptocurrency Tuesday, a coin called Libra that is said to compete with Bitcoin and Litecoin. Bitcoin has had discussions with Litecoin and its Lightning network in the past, and recent discussions with the US Treasury, The Bank of England, and Western Union. Officially, FB now looks to have […]