We have now officially entered the age of Artificial Intelligence. Why that's good is not for me to say.
Strange days indeed. Normally it's bears who are waiting for recession, however this time around it's bulls. This lethal turn of events became inevitable when Fed stimulus became the ONLY factor that matters to stock prices.
If you don't believe me, here we see that the entire rally since the October low took place amid falling bond yields. We also see what happened in March when yields flared up again. Bank run.
So it is that stocks are happily rallying into a latent depression deja vu of 1930.
On the monetary policy side, things get even more dire near-term given the ~85% probability of another rate hike in two weeks time.
Here we can compare what happened in late 2018 when the Fed blew up banks versus now. Back then, they paused and bank stocks rallied back above where they were pre-rate hike. Whereas now, six weeks later, regional banks have gone nowhere.
Another rate hike seems like a bad idea given that 2018 is the ONLY example when the Fed pulled off a soft landing. And now they have thrown out that playbook.
Then there is the looming fiscal fiasco. So far, this year is turning out to be similar to 2011. Back then, the incoming GOP House majority was hellbent on imploding the Obama budget. Funding ran out in May. This time, funding already ran out in January. The Treasury is already resorting to "extraordinary measures" to keep the budget from imploding.
As we see below, in 2011 the U.S. never actually defaulted on the debt, but GOP politicians dicked around until markets went RISK OFF. After that, the deal was ignored. Similar to October 2008 when the TARP bailout passed after it failed the first time. The market imploded. Similar to March 2020 when the Fed cut rates and restarted QE during the incipient meltdown. The S&P futures went limit down.
You get the idea. These fucking morons are wasting time while bulls get more optimistic by the moment.
In summary, party on Garth.
