Depending on who you ask at what time of day, you get one of these, or some combination.
These answers aren’t garbage but they aren’t new either. There’s nothing about today that materially changes these factors yet we get a fresh boost of bullishness every session. This is momentum. That’s not a magical revelation obviously but it’s the longest and most unshakable stretch of bullish momentum I can remember. Is this momentum rooted in *
sentiment
* or is it rooted in something else.Let’s get back to the punch bowl analogy. If this momentum is actually fueled by the major central banks of the world, then here’s the future:
- We’re going up until one or all of the central banks do something *massively* hawkish. o That ain’t happening anytime soon
They have to surprise hike and/or target equities and/or talk about curtailing speculative excess. They may have to cause a recession.
So we may be in the endgame of the central bank cycle. Maybe the central banks have accommodated for too long and they have to overshoot in the opposite direction. When that happens, it’s going to be as ugly for equities as ugly gets.
Here’s the rub. The central banks haven’t even started to wonder out loud if the accommodation has been too great for too long.
If I’m right (big if), they are so far behind the curve that the equity upside between now and their moment of truth is still large.
Maybe stocks will rally another 20% or 50% or 100% until they take shock everyone.
For the first time since the crisis, I’m worried that the Fed and the other central banks, cannot exit ZIRP smoothly.
I’m worried that the policy error is already done.