"Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested... the degree of the corrective wave will be larger than that which created the malaise of the 1930s and 1940s."
The battle lines are forming... Take away the undeserved from the undeserving and you get a tantrum. Steal the earned from those who earned it and you get righteous rage. One’s a firecracker, the other a volcano.
How would you describe the social mood of the nation and world? Would anti-Establishment, anti-status quo, and anti-globalization be a good start? These are all characteristics of the long-wave social-economic cycle that is entering the disintegrative (winter) phase.
“Buying equities will put additional pressure on corporate CEOs to cut expenses and to postpone investments, fostering even greater Main Street resentment toward the financial elite. Consumer confidence won’t rise as consumption and economic growth stagnate. Having so clearly sided with owners of capital, rather than the employees of capital, global central banks are likely to become an easy target for populist ire.”
In the market, extreme optimism results in price bubbles. One of the real-life manifestations of extremely positive social mood is the construction of enormous buildings. Market tops and skyscrapers often seem to emerge simultaneously, because both phenomena are the result of the illusion of infinite prosperity. But extreme psychological conditions do not last very long...
There seems to be a lot of smug certitude that Trump is definitely destined to lose the election. We are not so sure. At the very least we would think that the race between Trump and Clinton is far tighter than it appears according to recent polls. This bring us back to a point we mentioned last week: the market is not pricing in the “risk” of an election upset.
With the recent German terrorist attacks having subsided from memory, a new Emnid poll reveals that the traditional bounce in Merkel's popularity has failed to appear and instead about 50% of Germans are now against her serving a fourth term in office after a federal election next year.
Another day, another stunning reversal in Brazil's neverending Rousseff impeachment saga. Just hours after Brazilian stocks and currency tumbled when the head of Brazil's lower house Waldir Maranhao said he would annul the soon to be former president's impeachment process, the drive to oust President Dilma Rousseff is once again back on track after Maranhao reversed a decision that had earlier threatened to throw the entire impeachment process into chaos.