• Clifford Bennett, Chief Economist at ACY


• 12.01.2022 07:30 am
#stocks , Clifford Bennett has over 36 years of market trading experience and was named the 'World's most accurate currency forecaster' by Bloomberg New York. He has advised some of the world's largest organisations, billionaire investors, and political leaders and spoken at the prestigious APEC summit on reserve currency issues. Clifford is the Chief Economist at ACY Securities.

I don't trust the day's rally in stocks, this is why; the market rallied on Fed Chair Powell, comments below, but notice the idea emerging or being foisted upon the market that the Fed both knows what is happening and has the ability to control inflation?

This computer game like mentality, that if inflation goes up, we raise rates more, inflation goes down, game won, is a very dangerous form of Fed consciousness.

Image: tradingeconomics.com

SP500 Index 4 hourly chart

A good rally over the past two days, I believe fuelled by the idea that you just keep buying anyway.

Yet, there are thinking players/large funds out there, and after the initial fanfare and relief rally over Powell comments, and with time to consider what this means: A Federal Reserve liking to remain well behind the inflation curve all the way up, many funds will continue to offload some of their positions.

It is this offloading that has driven the recent significant sell-off. And when you look at the price action, the strength of recent days represents only a modest recovery to that weakness.

We are also faced with Inflation data soon to be released.

Hence, I do not see the day's strength as confirmation of anything at all really.

US Economic Sentiment

Continues to heavily test all time crisis lows.

The disconnect between Wall Street and Main Street must be approaching breaking point.

Wall Street is not smarter than the real economy. Never has been. On Main Street, people and businesses are bunkering down.

World Bank Slashes .5% from its US forecast.

US Bond Yields are breaking to new highs.

Australian Stocks Party hard, but why?

4 hourly chart.

The market seems to think that the removal of isolation requirements for many workers solves all. Ignoring at its peril that the main driver of the current downturn or setback is that many people are already in voluntary semi-lockdown mode.

This will not change any time soon, especially as the rate of deaths is continuing to climb. Unfortunately, 21 in each of Victoria and NSW today.

Market celebrations seem to be focused on a rather glossy screen of false assumptions at this point.

Buying Gold remains a stand-out favourite.

Daily chart.