This is one of the better performances of the US market in recent times,
and will raise hopes of at least a more sustained respite to the overall major
down-trend of this year.
At the same time the economic data flow deteriorated further however. My
expectation is that this stock market rally will not last long.
The US
economy contracted 1.5% in the first quarter. Already half way into recession. Some respite may be seen in the second
quarter data. But it is the second half of this year that I have been touting
as the real risk zone for the US economy.
Isn’t it interesting how Wall Street has kept ’talking’ strong economy,
while it was already in serious decline yet again.
We also saw significant and worrying declines in the Kansas City
Manufacturing Index, further property bubble bursting evidence in the sixth monthly
decline in Pending Home Sales, and last, but not least, the rolling-over into
decline in Corporate Profits?
Still want to buy stocks? Really? And the inflation and rate hikes, food
and energy shortage crises facing the world, have yet to reach full impact in
the real world economy.
My Triple Recession Risk forecast, Europe, USA, China, is no science
fiction affair. The outlook for the rest of 2022 is highly problematic.
My favourite market at the moment is the energy sector. Expect Oil and
Gas prices to continue to climb. The combination of actual loss of supply and
the increasing refusal to accept supply from Russia will see these commodities
move considerably higher.
Gold too, is building nicely for a resumption of risk-on buying in the
near future.
The US dollar is only immediately under a little pressure as most
commentators suggest the Fed minutes are more cautious, but I just cannot see
it that way.
The Fed Chairman has made it clear he is willing to cause economic pain
through aggressive rate hikes to defeat inflation. This is an error, but one
they are likely to be as stubborn about as they were that inflation would be
transitory. It is one grave historic error after another at the Fed at the
moment.
The market is still under-estimating the economic catastrophe of extreme
inflation and aggressive rate hikes mortgage stress occurring simultaneously.
Corporate Profits have begun to roll over and are likely to deteriorate further
through the rest of this year.
Clifford
Bennett
ACY Securities Chief Economist. The view expressed within this document
are solely that of Clifford Bennett’s and do not represent the views of ACY
Securities.
All commentary is on the record and may be quoted without further
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