"Too Quiet, Too Long" - Paulsen Warns "Don't Expect A Fun Ending"

It is no surprise to anyone just how quietly exuberant US equity markets have been over the last few years as every dip was bought and every new high a sign to invest more cash, because "the Fed has your back."

But, just how quiet is quite surprising and Jim Paulsen of Leuthold Group asks whether it's been "too quiet, too long?"

With small moves in prices comes the possibility that investors are too complacent, he writes.

Current conditions - as measured by trailing eight-year annualized standard deviation of monthly S&P 500 percentage moves - are similar to 1997 before the dot-com implosion, Asian crisis and Russian debacle.

  • After the 1966 signal, the S&P fell 22% (and even more in 1969 and 1970).

  • After the 1997 signal, 1998 had some big drawdowns before hitting the record highs and crashing in 2000.

While he's not predicting an imminent collapse, he is careful to warn investors that "past periods as stable as the last eight years didn’t have fun endings" is something to "noodle over during the dog days of summer."

And speaking of "noodling" - Gluskin Sheff's David Rosenberg has been asking some uncomfortable questions recently.

Good question David...

The world's biggest and most systemic banks are trading at 14-month lows and are in a bear market. The economic data are increasingly surprising to the downside. And yet stocks are a mere few percent off their highs.

Finally we note that The Fed's Jim Bullard pointed out - perhaps with a big nudge to stocks - that the market seems more dovish than The Fed itself. He is right...

So what happens next?

Comments

Thebighouse Thu, 06/28/2018 - 18:11 Permalink

STupid me..the last nine years have been Fed pumping liquidity to elevate market prices to create feel good.

Fed is DRAINING LIQUIDITY...no artificial market backstop.   

It wasn't a stable eight years....it was an intentionally manipulated eight years.........

BUT THE CASH WAS REAL.............stupid me.

I won't miss to the downside........or the next upside! ( if the Fed reverses its path)

Rapunzal Thebighouse Thu, 06/28/2018 - 18:19 Permalink

The banksters know when it will crash. Remember the crime of 1873 and the Great Depression. Both events concocted by the banksters. All crashes are major wealth transfers from the working middle class to the inbred elites who have rigged the markets, politics and laws so badly in their favor, that a casino is more reasonable with their odds. Now the banksters are only working feverishly on the excuse that will blame everything but not them.

In reply to by Thebighouse

schrock Thebighouse Thu, 06/28/2018 - 18:32 Permalink

But it's more than just the US Central bank pumping liquidity. Other central banks are doing the same thing, not to mention the massive amount of cash companies have accumulated since the last crash, which they are using for buy backs. Then there is the PPT intervening at any hint of a major downturn. And don't forget all of those public retirement systems and 401k's set to autopilot.

In reply to by Thebighouse

Yen Cross Thu, 06/28/2018 - 18:25 Permalink

  Both of the Pauls[e]ons Jim&Hank should be hangingalive from an large Oak tree, with Buzzards snapping at their balls, and Crows pecking at their eyes.

Blankfuck Thu, 06/28/2018 - 19:54 Permalink

NO WORRY!

COLLUSION CORRUPTION MANIPULATION!

THE FED RESERVE FUCKTARDS HAVE YOUR BACK AND NEVER WILL THE FARCE MARKET EVER CORRECT TO 50%  WHERE IT IS NOW

Blankfuck Thu, 06/28/2018 - 19:56 Permalink

NIKE REPORTS STELLER EARNINGS! WILL BUY BILLIONS OF THEIR STOCK BACK!

THE FED RESERVE FUCKTARDS BETTER PRINT MO MONEY TO FILL THE GAP WITH PONZI MONEY

TheMexican Thu, 06/28/2018 - 20:36 Permalink

How is it possible that the government is buying equities and not disclosing the size of its position.

What a fucken corrupt system! Unless this changes I will never move back to the USA.

And if it the outside chance it does change I will eat my own dick! (this way I will fit in with all the androgyny.... )/Sarc LOL