A Bearish Reversal, Trump’s Attempted Assassination, NVIDIA’s Feint, Powell’s Bear
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A Bearish Reversal, Trump’s Attempted Assassination, NVIDIA’s Feint, Powell’s Bear
Hey. Peter Navarro here with this week’s economic and market roundup for the week ending August 25, 2023.
The four big things that caught my eye this week included a strong bearish “technical indicators” reversal in the American stock markets, the one day wonder market action surrounding Nvidia earnings, the juxtaposition of the assassination of Wagner group head Prigozhin by Vladimir Putin against the ongoing attempted political assassination of Donald Trump, and yet another bearish turn of the Federal Reserve screws by the worst Fed chairman in history, Jerome Powell.
Let’s start with the bearish technical indicator; and as the important teaching point, stock traders on Wall Street use both technical and fundamental analyses to speculate on stocks. The fundamentalists like to look at bread-and-butter things like sales and growth and price cost margins. Technical traders don’t see any difference between potato chip companies and computer chip companies – they just look at chart patterns to forecast trends and trend reversals.
Of course, the very best traders will use both technical and fundamental analysis; but I if I had to rely on one or the other, I’d probably choose technical trading – as a side note, that’s the kind of trading that would provide the fortune for a guy who would eventually buy the Boston Red Sox and win a World Series. Just saying.
At any rate, as stock market guru Dennis Gartman observed this week in his famous newsletter, this last Thursday was “a historic trading day as the NASDAQ, the S&P, the Dow, and the Russell indices all traced out ‘reversal days’ marking [market] tops.
This observation is consistent with my claim that the stock market has been trading at the upper end of its range; and what this type of reversal generally means historically is “look out below.” It is particularly significant coming at the end of August as we enter the worst month of the year for the stock market historically, September – and October ain’t so hot either, except if you dig market crashes.
To put this in historical perspective, the Bidenomics stock market began at about 3700 on the S&P 500, topped out at 4758 on December 21, 2021, careened back down to 3601 on September 1, 2022, and then to the surprise of many analysts -- -- including yours truly -- made a bullish climb back to 4600 on July 2023 of this year, albeit short of its top.
Of course, since then, the market has trended down to about 4300. So all in all it’s been a wild ride – good for the trend traders and short sellers but bad for passive investors in market indices who have gained just 16% during the Biden regime – with the worst yet to come in my judgement.
By sharp contrast, the Trump administration began at about 2250 in January of 2017 and ended at around that 3700 in January when the Biden regime began. That’s about a 65% gain under Trump as opposed to, as I just said, Biden’s current 16% gain – with far worse likely yet to come.
Yet, it gets worse for investors under Bidenomics when you factor in inflation. Can’t say it better than this squib from a globalist rag which usually sweeps this kinda stuff under the rug:
Equities rose for the first time in four weeks, with the S&P 500 now recovering roughly 65% of last year’s bear-market drop. Factor in inflation, however, and the size of the retracement is less — only about 45%, adjusting for the consumer price index. Plotting the S&P 500’s value against nominal gross domestic product shows a similarly paltry recovery compared with the size of the economy, according to data compiled by Doug Ramsey at the Leuthold Group.
Going forward, the battle will be between a faux bullish massive fiscal stimulus (fueling inflation) together with a secular AI boom driving the market up versus various bearish cyclones and hurricanes dragging the market down – higher interest and mortgage rates, a looming collapse in the commercial real estate market, a squeezed housing and rental market, an equally looming fiscal cliff that will lead to contractionary fiscal or monetary policies like tax hikes or monetizing the debt, geopolitical turmoil with Iran, China, Russia et. al., sustained higher oil prices, and a looming civil war as the Democrats continue to escalate their lawfare on Donald Trump and MAGA nation.
Ergo, cash remains king. This is particularly true since 10-year Treasuries soared above 4.3% this week - the highest since 2007 - while a 30-year fixed mortgage rate has surged above 7% for the first time in over twenty years.
As for the second thing – quite related – stock market analysts waited with bated breath for the announced earnings of Nvidia, the chipmaker at the center of the AI revolution universe. NVIDIA constitutes fully 3% of the S&P 500 index. And yes, there were blowout earnings that spiked the market – but for only one day. Fool me once as they say.
As for Putin’s assassination of Prigozhin, whoever thinks that’s not indisputable fact probably also thinks the China virus came from nature rather than the Wuhan bioweapons lab. But what’s the difference between how Putin is behaving and how the Biden mob – Garland, Smith, Bragg, and Willis – are behaving in their attempted political assassination of Donald Trump and his associates.
Finally, Fed chair Jay Powell kept his string intact of taking the podium and driving the stock market down. On Friday, after the market opened green with strong futures, Powell spoke and the stock market reversed downward while bond yields rose. While the market rebounded later in the day, one would do well to remember here that on the day of a 2022 Jackson Hole speech by Powell, the S&P 500 fell by more than 3% and within a month – here’s the warning – crashed 13%.
Well that’s it for now. I’m trying to provide you with some perspective that will help you preserve your wealth and protect your job or business. Feel free to take advantage of the free coupon to take my online Strategic Macroeconomics for Business and Investing course – or share the coupon with a friend or family member.
Peter Navarro. Out.
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I would rate JPow's record as Fed Chair better than his three immediate predecessors Yellen, Bernanke, and Greenspan. The only one I think did better was Paul Volcker. And here is why I think JPow is better than those in-betweeners. And he is certainly better than Arthur Burns and J McChesney Martin.
One mistake Volcker made was thinking that the recession that was happening in 1982 was over, and deciding to drop the Fed Funds rate. This was the cause of the runaway inflation that followed in 1983 and his response to raise the Fed Funds rate quickly toward 20%. JPow sees that as Volcker's mistake and doesn't want to repeat it. That is the reason he's saying that rates may still have to increase. Unfortunately, this puts him between the proverbial rock and a hard place. He can choose to drop interest rates and see runaway inflation, or keep raising interest rates (although at a slower pace than last year) and cause a break in the nation's economy.
I don't think JPow likes those choices, but the Fed mandate does not say anything about doing right for the nation's economy. But it does say something about inflation.
As to Putin assassinating Prigozhin, my money is on the CIA. Prigozhin is Putins man in Africa to establish a foothold for Russia vs China's why would he get rid of him. Rigozhin's play at Moscow was a against Putin's military leader, not Putin.