The equity markets see something you and I can’t.
There is just no way as the US economy struggles to continuing growing, that the stock market should look to set all-time highs this week.
Given that equities have no fear of the April Fed meeting, since Q1 GDP estimates put it at 0.3% annualized growth, which puts this quarter at 0.075% growth.
Hell, if I decide not to buy a second bag of grass seed this spring, we could have a negative quarter. The margin is razor thin.
So what is six months out that could have the market so giddy?
Well we will be in the home stretch of the presidential election and many analysts are probably figuring that the US election will be so tight after the conventions that there is no way the Fed will be able to raise rates until December, if at all.
If free money will rule the day for the next six months, then let’s run up equities and crude oil for the time being, despite there being no cutback on output.
Sure we will get the assorted Fed president coming out saying rates will rise soon, to jawbone the market back a little. Janet Yellen & Co. don’t want to be accused of creating bubbles you know.
So this spring’s green shoots will be sprung from the Fed’s inability to really do anything to help the economy. It’s too busy managing to keep US treasuries low to help on Uncle Sam’s borrowing costs.