Here is a single chart that proves how completely the Fed’s end-game for its recovery failed, which means the fake recovery, itself, is failing. It’s not hard to figure out what happened here.
Talk about a euphoric rise at the end of the Trump Rally heading into 2018, followed immediately by a massive blow-off top. When you compare the size of the blow-off to the total size of the S&P 500, it looks almost like Mount Saint Helens blew its top off.
2018 became a year filled with market explosions that happened in spite of a massive increase in stock buybacks — the greatest number of buybacks in the history of the world (not even slightly an exaggeration). Those buybacks were funded by some of the largest tax breaks in history and by hundreds of billions of dollars in foreign profits that suddenly became spendable in the US. That means the Fed’s end game failed even when it had the most spectacular tail winds you could ever hope for helping it out! The Fed could not have had a more favorable situation in which to attempt its experiment.
2018 gave us the worst stock market crackup by far since the bottom of the Great Recession. (So much so that it stands out like a fire on a hilltop in the graph above of that entire period. You don’t have to look for it to find it.) We can now clearly see the market’s breakup coincided perfectly with the Fed’s balance-sheet unwind. In only three months the market lost almost a quarter of everything it had gained over the entire past decade of massive quantitative easing!
Now you can see the first big plunge in January when I said it would happen due to the start of Fed tightening while its most damaging three-month plunge began in October, also when I said it would due to the Fed’s tightening hitting full speed. The timing was predictable because the Fed had already laid out the schedule for its tightening program.
Read the rest here: The Great Recession