The Fed has all but guaranteed it won’t be raising interest rates in June.
In some ways this was non-news. The markets had been expecting a potential rate hike to come in September if not later. Interestingly enough however, the bulls didn’t use this to gun the market higher. If anything the S&P 500 has been weak since this was revealed.
Stocks have broken out of the wedge pattern they’ve been forming since November… but there’s been no follow through. And more and more it’s looking like a false breakout similar to the one that occurred in late February 2015.
The bigger issues for investors concern currencies, most notably the Euro.
For three years now we’ve been repeatedly told that the Greek situation was “fixed.” Those were lies. And those lies have resulted in a gross misallocation of capital both financial and political.
From a macro perspective, anti-austerity/ anti-Euro political parties have seen a chance to capitalize on popular dissent. Simultaneously, pro-Euro groups have been forced deeper and deeper into the deception that somehow the Euro is a good thing for all involved. Distrust in politics and in the Euro is now higher than ever in Europe.
The impact of this will be severe. Europe as a whole is socialist with the percentage of the population employed by the Government ranging from 30% in Germany (the most free-market) to 56% in France (the most socialist). You’re talking about a joint economy of $16 trillion in which 30%-56% of the population is employed by the Government and the Government is shredding democracy and the legal system. The cultural reactions will have financial repercussions for years to come.
The Euro has taken out all support from the post-2002 era. The era in which the Euro was seen as a viable currency/ competitor to the US Dollar has ended. We’ve seen a dead cat bounce… but the chart suggests the currency is going below parity with the US Dollar
This has laid the stages for the dissolution of the Euro in its current form. When this crisis hits, it will be entire countries going bust, not just banks.
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