• Clifford Bennett, Chief Economist at ACY


• 28.10.2021 12:00 pm
#stock

AUS200 Hourly

Boom!

Well a little boom so far...

Good morning,

This will be one of the shortest reports all year. I could be all clever, but the facts are rather simple.

The world is bullish. The world has been buying. The economic data in the world's three major economic zones has been awful. Everyone has been looking past that, to a future positive image that just may not exist at all. The further excuse has been strong earnings.

Current strong earnings do not stack up over the long term, against on-going sustained supply chain disruption, extremely high inflation, still serious under-employment, rolling Delta outbreaks, and central banks, several of which around the world have already started hiking rates, and last but not least, higher bond yields becoming increasingly attractive as an alternative to stocks.

Higher energy costs will significantly drag an economy, even when that economy is strong. This is not the case for the USA or China, and therefore further economic slowing is a real risk. At the very least, we are in for a long period of subdued economic growth.

The price action of US stocks and Australia just turned ugly in a very sudden way. We were looking for a top, and so are more attuned to spotting this early than most economic/market commentators.

It is a small 'boom' so far, but very much has the look of the beginning of something big. Yes, I have said this before, and were were right for 6-9 weeks, before the most recent 2 weeks saw that sharp rally. My very real suggestion to you is that this past two weeks saw the completion of everyone who wants to buy, having done so.

I feel more emphatic about this just now, than previously. I could well be wrong, but I urge you to today, this very day, again consider your defensive strategies for a sustained market downturn.

The economics are terrible and the price action does not look good. Consider this at least a first level alarm warning!