Wall Street AND Main Street Going Down in Bidenomics Flames

Peter's Weekly Market and Economy Rap

Sep 23, 2023

Wall Street AND Main Street Going Down in Bidenomics Flames

Hi. Peter Navarro here with my weekly economy and market wrap for the week ending September 22, 2023. Just seven days ago, I warned that bearish market forces were steadily gaining the upper hand; and for the last six weeks I’ve similarly warned that the US stock market, as best measured by the S&P 500 was stuck in a trading range, with the growing likelihood of a bearish reversal and significant market correction.

For these last six weeks, the S&P 500 has indeed fallen five of the six weeks; and this week’s action marked one of the worst of these weekly bearish mauling’s. For the week, the S&P 500 fell 2.9% and the NASDAQ dropped 3.6%, the biggest drop for both indices since March.

I will take a deeper cut at what is going on in my next substack and podcast post on Monday; but for now, here’s the basics.

As I have noted, the bulls have been riding a wave of massive Keynesian over-stimulus embodied in three major pieces of legislation pushed through by the Bidenites. However, this wave has inevitably created bearish inflation and a steady upward move of interest and mortgage rates and attendant wage-price spiral that are now beginning to choke the economy and stock market.

On top of this fiscal stimulus of not real sustainable growth but rather of an ugly stagflation, Joe Biden has also created an oil market which is now delivering energy at levels 50% higher than in my Trump years with the risk now to even higher prices. Such higher energy prices act as a tax on both businesses and consumers and make it even more difficult for the Fed to control inflation through its one trick pony of tight money.

Here's what one analyst predicting at least a 15% market correction had to say about this:

“Oil is one of the biggest challenges for the Fed,” While the policymakers are focused on core inflation — which excludes volatile inputs like food and energy — higher oil prices will move durable good prices higher and hurt the economy, making it “difficult for the Fed to meet the market expectations of three rate cuts next year.”

That is indeed about right; and this same analyst has the S&P500 falling from about 4,500 to as low as 3600. Of course, what he isn’t telling you is that there won’t be any big bounce back anytime soon after the correction. Say a prayer for your 401Ks and jobs. Cash may well be king!

As a final note, the Fed met this last week, and Fed Chairman Jerome Powell kept his string intact of always driving the stock market down with his speech. Even though the Fed did not hike rates, which was the consensus view and no surprise, Powell was more hawkish than expected; and he left little hope for a reduction in rates anytime soon – while leaving the door wide open for additional hikes if necessary.

I will leave you with a brief discussion of the 5-day chart of SPXU, which is the exchange-traded fund that is a leveraged short of the S&P 500 that I have been telling you about.

Note: If you are listening on the podcast rather reading this missive, you can check out the figure at www.peternavarro.substack.com. That’s www.peternavarro.substack.com.

You can see in the chart a distinct gap down in SDXU the second day of the week and the day before the Fed meeting. Those with weak knees might have bailed at that point, but if you are firm in your own analysis, you’ll stay the course.

After the Fed meeting, there was a big gap up and for the week, SPXU rose from about $10.60 to $11.67. That’s about a 10% gain on the triple short in just one week. REMEMBER: I’m not offering stock market advice and don’t recommend you jump into SPXU. I point this out because this is how the big boys on Wall Street play the game.