Shocking: Trump Rally Is Just Getting Started?
Fortunately or unfortunately, not everyone is as bearish as your truly. In fact, most people are extremely bullish. As we wrote before Bullish Sentiment Continues to Skyrocket
Let’s take a look.
Many investors are incorrectly attributing $2 trillion of gains in stocks since early November to expectations for stimulus and policy changes, Chadha wrote in a note Thursday. He believes the rally is reflecting nothing more than the removal of uncertainty around the vote. Looking at equities, Chadha wrote that they aren’t expensive on an absolute basis and will extend recent gains as earnings and the economy improve.
Fair enough, but let’s take a look at the bearish side of the story.
- Uncertainty: If anything, uncertainty has increased. Despite VIX/VXX hitting their respective lows. Will there be a trade war with China/Mexico/EU, will there be an actual war with Iran or N. Korea…etc…. No one knows.
- Not Expensive On Absolute Basis: I am not sure what that means. But here is what I do now. Most of the earning growth over the last few years, since 2009 bottom, came out of massive liquidity pump and share buybacks. Shiller’s Adjusted S&P P/E ratios is the second highest in history. Just a point shy of 1929 top.
- Earnings and the Economy Will Improve: Based on what – tax cut…more stimulus? Once again, stimulus and debt are the problem. Deflationary forces are once again taking hold and there will be no way to avoid the final collapse.
Then again, who knows. Maybe all of the above comes true. Perhaps even before Deutsche Bank itself blows sky high.
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