As I’ve written about the Great Fleecing of the US middle class by the Federal Reserve during its many phases of Quantitative Easing — where trillions of dollars were handed over to the richest Americans in the form of asset bubbles in stocks and bonds — now a new market report comes out saying global stocks have lost nearly $17 trillion in value over the last 6 months.
Most of European and Asian stock indices are in bear market having lost more than 20% of its value from their August 2015 highs, the US has lost 16% since the summer.
Now who do you think experienced those losses? The 1%ers, who move in and out of stock, bonds and other markets as they have their wealth managed by pros, or the dwindling ranks of middle class Americans trying desperately to hold on to the last vestiges of a nest egg or to fund college for their children, using the tired old thought of buy-and-hold being proffered by a broker at Merrill Lynch, who more than likely is divorced with an alcohol or drug problem and losing money in the market himself.
This market bubble popping is a very easy way to pare the gains of the Americans who for some reason were not completely wiped out in the 2008 crash. These boom and bust cycles happen on a 7.5 year run up, with roughly an 18 month sell off in between.
So let’s figure how this will play out.
- First, the Fed is done with interest rate hikes. One and done will be the mantra for 2016.
- Secondly, this market sell off will continue through the summer. The Fed can’t cut rates in second half of 2016, for fear of embarrassing the Democrats over their failed monetary policy. So the overall stock market trend will be lower lows and lower highs through the election.
- Lastly, this continued economic malaise may be the needed fuel to put a Donald Trump into the White House.
I have stayed clear of politics in my column, but if I am correct on the markets slipping lower through the election cycle, there will be a hunger to move away from socialistic monetary thought and that could usher in a Trump win.
That said, will there be much difference on the monetary side with a Trump White House? Probably not, but that is for another column down the road.