Thursday, September 20, 2018

Inflation or Trump? Dow regains all-time high as equity markets buck trend of a cycle top back in January

Leading into the 2008 financial crisis, equity markets had topped out around the same time as the Housing bubble a year prior.  10 years later, these same markets appear to have bucked this trend as on Sept. 20, the Dow has once again achieved a new all-time high.

Thanks to investors buying the f**king trade tariff dip, The Dow Jones Industrial Average has finally taken out the January record highs... - Zerohedge
Of course the Dow is not the only U.S. equity market to have achieved new all-time highs over the past month as both the Nasdaq and S&P 500 have done so over recent days.

What is perhaps the most interesting question to pose from this stock market euphoria is what is the real catalyst behind the surge in equity prices?  Pundits will say it is the Trump Tariff Put while history appears to balk at this and point towards rising inflation as the real inflation rate has crept up to levels not seen since the late 1970's when the U.S. was stymied by the grasp of 10% inflation.  Either way, investors should not be looking at the overvalued stock markets for answers as it will be the bond markets that will provide the best answer as to which direction both the markets and economy will be going in the future.


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