Economic cracks big enough to drive a car industry into are opening up all over the globe. Trade gaps are opening up between major allies. Widening spreads between the dollar and other currencies are shredding emerging markets. As we start into summer, these cracks and several others described below have become big enough to get everyone’s attention, just as I said last year would become the situation.
I had, as readers here know, predicted the same for last summer but revised my timing to this summer after Trump was elected and the hope for tax cuts lit on fire one of the world’s greatest stock rallies. Those tax cuts are also creating another rapidly rising gap between government revenue and government spending.
That rally died, pretty much as I said it would, almost as soon as those tax cuts became law. In fact, it died sooner than I said it would because I thought the tax cuts would provide more economic levity than they have. The Dow and S&P 500, as of last Monday’s close, hit their longest correction period since 1984! That’s more than half of my lifetime since we saw a correction period last this long.
However, now that the trade war is officially engaged, FANGMAN stocks (Facebook, Apple, Netflix, Google, Microsoft, Amazon and NVIDIA) are taking the market up again. Whether they will undo my prediction that the second leg down in the stock market will occur in early summer … remains to be seen.
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