07 Jul ARE WE PLAYING JENGA?
Posted at 12:38h
in Market Commentary
In my view the relentless rally in companies considered to be havens from the virus is now at manic proportions. Ownership is crowded and valuations are so stretched, any event could cause the proverbial Jenga tower to topple.
The recovery is V shaped but some are suggesting the economic rebound will soon falter because of rising virus cases. I do not agree with this premise.
As noted many times money supply is growing at an unprecedented rate. This money is finding a home in both the greatest capitalized momentum issues and the real economy. I think the odds are greater than 50% the economy will soon face inflationary pressures, where Main Street will outperform Wall Street.
Some would suggest that this is an improbable scenario but if we “follow the science,” such is the expected norm, not a one-off event.
I will argue rising interest could be the proverbial event that topples the Jenga tower. Again, if precedent is of any guide, all major market selloffs since 2008 was interest rate/monetary policy inspired.
What will happen today?
Last night the foreign markets were down. London was down 1.23%, Paris down 0.94% and Frankfurt down 1.07%. China was up 0.37%, Japan down 0.44% and Hang Sang down 1.38%.
The Dow should open moderately lower on concerns the recovery will take longer than expected. The 10-year is unchanged at 0.68%.
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