The US market has been fairly strong in recent months. You might well be wondering how much longer this can go on. I am actually expecting a pull-back fairly soon. There is of course the ARMM loan re-sets, but there are other factors as well. I suspect the swine flu hoisted up sales in the last quarter, so we might expect a slackening after the build-up of those food inventories.The current softer interest rate outlook is really just fluff since anyone will be hard-pressed to get credit in this market. Really the global central banks are just subsidising the 'perception' of cheap credit. The only ones getting cheap credit are the banks, and they have been busy investing in stocks and commodities to rebuild reserves, rather than lending to lovely people like yourselves. So having reached a support level, I think you will see them dump those positions, unless they are planning further stimulus.
There is actually one reason why I think the governments might in fact consider further stimulus - they have no money, and they are not likely to raise taxes in hard times. More probable is the prospect that they will continue the great money illusion. This will of course be inflationary, at least to asset prices. The reality is - it will only be government money supporting the market for the next few years. It is apparent that governments are all too willing to throw everything at this market to stop the 'rot'. We need to remember that there is nothing stopping the Dow Jones going to 15,000 if the US government is willing to undermine the value of the USD. Expect central banks around the world to help them.
--------------------------------------------There is actually one reason why I think the governments might in fact consider further stimulus - they have no money, and they are not likely to raise taxes in hard times. More probable is the prospect that they will continue the great money illusion. This will of course be inflationary, at least to asset prices. The reality is - it will only be government money supporting the market for the next few years. It is apparent that governments are all too willing to throw everything at this market to stop the 'rot'. We need to remember that there is nothing stopping the Dow Jones going to 15,000 if the US government is willing to undermine the value of the USD. Expect central banks around the world to help them.
Andrew Sheldon www.sheldonthinks.com
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