Dear Readers,
The Dow is really trying to surge through the resistance level of 20,000. It may do it this week or there may be a 5-20% correction before breaking through that resistance level. Many stock market experts have turned bearish pointing to the longevity of this bull market, overvalued stocks, Trump’s tweeting habits and what many political pundits consider as dangerous casual comments about serious global problems such as US, Russian relations and North Korea’s threat to continue to develop nuclear weapons capable of reaching parts of the USA. Trump’s reply in a tweet, “it won’t happen”, is considered by many as proof of Trump’s lack of experience in dealing with global matters. Many investors are poised to bail out of stocks before inauguration day. Many stock market experts and some respected economists are even predicting a recession this year. Most investors will stay and weather the bumpy ride through the first 100 days of Trump’s presidency. There will be wild fluctuations but I predict there WILL NOT be a recession in 2017. Be reminded that in general, stocks will lose 30% to 60% of their value during the bear market that follows a recession. When will it happen? When should you get out of the stock market? Read my exit strategy in, “DidoSphere LIVING RICH AND LOVING IT”.
Hello,
I recently bought Dow to Drop 80% and your Living Rich kindle books. I scanned both and they look very interesting. Great job!
Obviously, I am concerned about and want to avoid the next market crash.
My question: In your estimation, how has ZIRP and NIRP impacted your early warning Yield Curve Inversion indicator?
Thank you.
Best regards,
Greg
Hi Greg,
Thanks for downloading my books and for your excellent question. First, I believe in the old adage, “ask 10 economists and you’d get 10 different answers.” that is because, 1) the data they use is outdated when it becomes available, 2) no statistical charts that economists produce can predict with a 100% certainty how a consumer is going to behave. Expansions and recessions are purely consumer driven. The economy works in cycles and there have been no statistical charts created that were 100% correct all of the time. For example the Taylor Rule and the Phillips Curve have been discredited for their theories and economic assumptions. In answer to your question, ZIRP or NIRP, for those not familiar with the acronym means Zero Interest Rate Policy and Negative Interest Rate Policy respectively, in my opinion is a big factor in preventing a recession, albeit the economy will continue to be sluggish. It’s a catch 22. The Fed lowers rates to stimulate borrowing and increase growth and inflation but it is foolish to do it GDP is 2-3% per annum. Obviously, ZIRP or NIRP is good for stocks because of investors looking for better than zero interest rate on their savings. Of course, this is really bad for retirees who cannot afford to lose any of their principal but have to take a chance on stocks and bonds to earn more. The yield curve inverted just prior to every recession in that last 50 years, but I do not see it inverting in 2017 and not even in 2018. Trump’s promise of lower corporate, capital gains and inheritance taxes is good for the economy but we will have to see how the proposals play out in Congress. Between now and the next recession, there will be market corrections. That is what we will continue to monitor and discuss in this website.