Even if we can avoid a recession, the stock market cannot remain at an overvalued level.
The stock market cannot remain overvalued without artificially low interest rates and artificial liquidity. Thus, a soft landing will not be enough to prevent more weakness in the stock market. (Besides, a soft landing is still quite unlikely.)
Since we have some new readers, we’d like to take a second to reiterate that we usually like to include topics from both sides of the bull/bear ledger in our weekend pieces. We just want to show both sides of the argument. Therefore, some of our comments will sound a bit contradictory. However, we always make sure to let you know which side of that ledger we stand at any given time. Thank you.
Table of Contents:
1) It’s not the Fed’s job to prevent recessions…and they can’t leave markets endlessly expensive.
2) Today’s situation is very similar to what we saw in the early 2000s, so invest accordingly.
3) Trouble for the consumer: Yes, LT rates are somewhat lower, but they’re still A LOT higher than a year ago.
4) The broad stock averages are still at very, very important technical junctures.
5) Everybody is jumping on the gold band wagon. We still love it longer-term, but it might need a breather soon.
6) The $25k level on Bitcoin should provide the real test.
7) The European stock indices are getting overbought near-term.
8) Crude oil is very close to a KEY resistance level.
9) Let’s look at the chart on Microsoft (MSFT) in front of their earnings (Tuesday).
10) Summary of our current stance. Bear markets don’t bottom at these valuation levels.