central banks Markets

What Really Matters?

It's too hot to go out, but too nice to stay in.

It's too hot to go out, but too nice to stay in.
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2 comments on “What Really Matters?

  1. Anonymous

    Aren’t we really looking at a Honda Accord with shocks so worn that a spring is about to break after 600000 miles? In other words, at some point we will observe a tolerance to the stimulus drug, like we now see in China? The long term dynamic is right there to see in Japan. But the global economy can’t be Japan. Obviously everything breaks down. The “coordination” in the EU demonstrates how the consequent destruction of natural nation to nation correlation might hobble a system lacking vision to recognize excessive homogeneity and its consequences.

  2. what really matter is growth and corporate earnings. if these turn negative, central bankers won’t be able to stem the tide. look at 1987, 1994, 1998, 1999, 2010, 2012, 2015, early 2018 , early 2019 as examples where central banks stepped in during a “crisis”. markets quickly recovered because the economy and corporate profits continued to grow. in 2000 and 2007, central bank intervention was not effective because the economy and corporate profits were rolling over. I went back and read articles from 2000 and 2007. I wanted to see what caused that markets to recover in March 2000 and Oct 2007, before they fell again. in both cases, it looks like the markets had confidence that fed lowering interest rates would boost the economy. or that the fed could “contain” the problem. the housing crisis was well know and discussed in 2006. what ‘s also interesting when reading articles from the time was the discussion of the inverted yield curve. exact same discussions as today. “what does it mean?” “every time in the past it has predicted a recession. will this time be different?” in both 2000 and 2007 the deterioration in the economy was too much for the fed to overcome, and earnings fell by 50% as did the stock market (SP500). nasdaq more like 80%. keep an eye on the economic indicators. if they roll over, so will the market and central banks won’t be able to stop it, maybe lessen the impact (maybe) , but the market will fall in line with the projections for forward earnings, plus some multiple comtraction which will be dependent on the magnitude of the earnings decline.

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