APR 2, 2018
It’s been one long, uninterrupted, 10-year fever dream. Central banks have kept pouring gasoline on the dying embers of economic growth for a full decade now. It’s been nothing less than virtual reality.
But just because you put on the goggles and strapped into the chair for 10 years, that doesn’t mean reality has magically improved itself in the interim. All the fundamental problems you put off dealing with all that time have only gotten worse. Corporate profits are lower than they were six years ago. During which time the S&P 500 has doubled. Madness.
Following the financial crisis the world needed coordinated structural solutions (and those would be hard requiring tough choices).
Instead what the world got was coordinated central bank intervention which shrunk the middle class, made the rich richer and provided the rest with the illusion that things were getting better as pro forma unemployment rates shrunk and housing prices rose again and stock markets jumped from record to record.
In the meantime politicians (of both parties) used the easy money illusion to do precisely nothing on the structural front. Instead they added debt and more debt and recent tax cuts just added to the combination of both: Wealth inequality and debt.
All we’ve had is a recovery following the “earnings recession” which in turn followed over $5 trillion in global intervention. In fact we saw corporate profits actually shrink in Q4 of 2017 printing fewer profits than Q4 of 2014, yet market multiples are higher to the tune of nearly 25%. Multiple expansion at its finest.
What, precisely, is the buying outlook for stocks from here? More stimulus? Please. All these markets have ever done is run from one stimulus freak show to the next and now they have nothing, but perhaps still ride the benefit wave of the current artificial stimulus train.