Wall Street is Desperate
Look at what it is costing to keep the ball in the air, trillions of Government money, and it will not be enough. The paradigm is changing and again, I will repeat, COVID 19 is just a trigger, not a cause of all this desperation. The formula has been flawed starting with the Supply Side approach of the 1980’s that was based on leveraged speculation at its core. It was a money mover, not a growth / money maker.
A Massive Deflationary Panic Collapse Coming
A massive Deflationary collapse is really the only end game that can happen. All the effort is on the side of production, not demand. Demand is controlled by the people, and it is timid at best. Who knows when the wheels come off with all the manipulation going on, but it will happen, probably sooner rather than later. If you like to pick a time for the bottom, think October 13th 2020. Just kidding on the date, but why not then?
How will this Happen?
We would expect it to come in steps , first we will see investors come to realize that the two areas of interest in higher prices are long bonds and gold. The panic move out of stocks will accelerate the move into these other two areas.
One must keep in mind that this bond move will be the last rally that started out of the Volker era. Chart objectives on the TLT bond etf could reach the 200.00 level. The final push will be then a massive roll into Gold as bonds top out. Look for a massive decline in commercial real estate to accompany the stock rout (at the right time take a look at REK ETF).
How low will the S&P go?
If I had to pick a number I would think 1333.
Economic Fracture Chart
Back in January 2018 we put together what we call an Economic Fracture Chart. We update and monitor this chart as part of our background inputs. Here is the chart as of today. The last time we posted it was in August 2019.