Vital Signs: 7 Vital Facts to Know About the Economy

The Key: Levels vs. Trends

Economic reports containing mixed signals along with highly varied interpretations of the reports are creating conflicting views on the economy. 

Some interpretations focus on levels noting the currently depressed economic levels. Conversely, others focus on the trends noting the economic rebound occurring. 

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ANATOMY OF THE COMING MARKET DECLINE: FRENZY, FEAR, FIZZLE, AND FALL

Stock market prognostication is something I typically highly recommend against doing, yet I do so below. Why?

First, because I perceive an unusually high level of risk in today’s equity markets. This is based on the inconsistency between today’s stock market valuations on the one hand and on the other hand today’s depressed economic environment and especially because of the highly uncertain vaccine development and distribution timeline.

Second, because the risks inherent in today’s equity markets so far have not been appropriately highlighted in the financial media outlets targeting investors.

If after reading below you are more aware of the heightened risk in today’s equity markets, the primary objective in writing this will have been achieved. The predictions are secondary in importance as they are merely the vehicle to communicate the risks in today’s equity markets.

Stage 1: Frenzy

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Forget FAANG Stocks, Watch FAACT State Infection Rates For The Direction Of Equity Markets

FAACT State (FL, AZ, AL, CA, TX) infection rates have nearly tripled since reopening.

If businesses are forced to suspend or severely curtail operations again, that would be devastating fore the economy.

Watch the FAACT state infection rate for clues to the direction of equity markets.

Forget FAANG Stocks, Watch FAACT State Infection Rates for the Direction of Equity Markets

FAACT states (Florida, Arizona, Alabama, California, and Texas) have seen a near tripling of their weekly infection rate since reopening. If business in these states are forced to close or even just significantly restrict operations in the face of rising infections, dreams of a “v” shaped economic recovery could turn into the nightmare of an “L” shaped economic outlook.

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