A few week’s ago I discussed the post-election surge in the market based on rather optimistic outlooks as opposed to the technical underpinnings that currently exists. As I specially stated in the weekend newsletter entitle “Dow 20,000” the market was beginning to take on an eerily similar feeling:
“If this market rally seems eerily familiar, it’s because it is. If fact, the backdrop of the rally reminds me much of what was happening in 1999.
- Fed was hiking rates as worries about inflationary pressures were present.
- Economic growth was improving
- Interest and inflation were rising
- Earnings were rising through the use of “new metrics,” share buybacks and an M&A spree. (Who can forget the market greats of Enron, Worldcom & Global Crossing)
- Stock market was beginning to go parabolic as exuberance exploded in a “can’t lose market.”
If you were around then, you will remember.”
With Janet Yellen and the Fed once again chasing an imaginary inflation “boogeyman” (inflation is currently lower than any pre-recessionary period since the 1970’s) the tightening of monetary policy, with already weak economic growth, may once again prove problematic.
“But Lance, this is the most hated bull market ever?”
If price acceleration in the market is a sign of investor optimism, then the chart recently published by MarketWatch should raise some alarm bells.
The only other time in history where the Dow advanced 5000 points over a 24-month period was during the 1998-1999 period of “irrational exuberance” as the Fed was fighting the fears an inflationary advance, while valuations were rising and GDP growth rates were slowing.
Maybe it’s just coincidence.
Maybe “this time is different.”
Or it could just be the inevitable beginning of the ending of the current bull market cycle.
Here is what I am reading this weekend.
Fed, Economy & More Trump
- 2016 – The Beginning Of The End For The EU by Simon Constable via Forbes
- The Art Of Trade Warfare by Danielle DiMartino-Booth
- Economics Is Not Astrophysics by Emmett Tyrell via American Spectator
- Guiding Thoughts On Regulatory Reform by Sam Batkins & Ike Brannon via Cato Institute
- Trumps Tax Plan & The Dollar by Farhi, Gopinath & Itskhoki via Proj. Syndicate
- Did Ford Cave To Trump? by IBD
- Markets Underestimating Trumponomics by Fergal O’Brien via Bloomberg
- What Strong Jobs Recovery Tells Us by Mohamed El-Erian via Bloomberg
- Reagan vs. Trump Macro Initial Conditions by Macroman via Global Macro Monitor
- On Policy – It’s President Trump vs Candidate Trump by Caroline Baum via MarketWatch
- The Fed’s Playbook For 2017 by James Rickards via Daily Reckoning
- Fed’s Policy Uncertainty Bingo by Mike Shedlock via Mishtalk
- Trump Has Enormous Blindspot To WallStreet by Michael Krieger via Liberty Blitzkrieg
- Not The Time To Be Bearish by Jared Dillian via Maulding Economics
- Markets Post-Inauguration by Ed Yardeni via Yardeni Research
- Valuation & Investment Analysis by John Hempton via Bronte Capital
- Why January Is Still The Most Important Month by Jeff Hirsch via Almanac Trader
- The Zero-Budget Portfolio by Meb Faber via Faber Research
- Is The Market Overpriced? by William Droms via MarketWatch
- 2016 Year In Charts by Charlie Bilello via Pension Partners
- Meet The 2017 Dogs Of The Dow by Jon C. Ogg via 24/7 WallStreet
- Missed Most Of 2016’s Projections, Here’s 2017 By Byron Wein via Blackstone
- Investors Enter 2017 In Front Of A Steamroller by Sam Ro via Yahoo Finance
- Top Research Papers Of 2016 by Cullen Roche via PragCap
- 10-Times Less Is More by James Altucher
- 2017 – Most Risks Since WWII by Tyler Durden via ZeroHedge
- Fair Share? Top 400 vs Bottom 50% by Mark Perry via AEI
- What Is The Neutral Interest Rate by Mark Spitznagel via Mises Institute
- U.S. Growth Rates Hits New Low by William Frey via Brookings Institute
- Risk Of A Global Conflagration Has Risen via Council On Foreign Relations
- If Italy Leaves EU, It’s The Beginning Of The End by Steve Forbes via Forbes
- How To Play Catch-Up For Retirement by Joel Johnson via Forbes
- The Struggles Of Retirement Planning by Richard Eisenberg via MarketWatch
- Donald Trump, Trade Warrior Edition by Edward Harrison via Credit Writedowns
- The Troubling Birthrate Decline by Stephen Mihm via Bloomberg
- Also Read: American’s Prefer Cats To Kids by John Mauldin via Zerohedge
- Threat To Profits For 80% Of Advisors by Paul Katzeff via IBD
- Not-So-Secret Intelligence: Tapped Central Banks by Reuven Brenner via Asia Times
- Hidden Costs Of “Made In America” by Chico Harlan via Washington Post
- Red Flags Waving by John Hussman via Hussman Funds
- 2016 Charts Of The Year by Dana Lyons via Tumblr
- Important Reading You Should Catch Up On by Jesse Felder via The Felder Report
“Do. Or Do Not. There Is No Try” ― Yoda, Empire Strikes Back
Questions, comments, suggestions – please email me.
Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors. He is also the host of “The Lance Roberts Podcast” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter, Linked-In and YouTube