What’s bad for America is sometimes good for the market.
Historic increase in monetary supply to fight Covid crisis will lead to higher consumer prices
The exuberant rebound of large companies while their small competitors struggle will require more
vigilant government
antitrust action than ever before, an economist says.
The coronavirus pandemic will cause many cash-strapped Americans to sell their homes, flooding the
market with excess supply.
The latest figures in the UK from December show that house prices are now 8.4 times the annual average
income. The only time that figure has ever been marginally higher was just before the global financial
crash in 2008.
The house price-to-median income index measures the affordability of housing relative to the average
person's salary. It is flashing red too: it is giving us a reading of 6.7, just below the previous high
of 7 in November 2005.
Figure 1 shows the yield curve for the past 30 years. In these 30 years, we have seen three recessions.
Negative real yields also suggest that gold may have some upside. Real yields are almost negative one
percent as
inflation expectations have crept into the market.
There is a reason for great numbers from retail sales. Large-scale fiscal loosening in the U.S. has
caused the private
sector to amass significant savings (referred to as M2 money supply - cash, deposits, and savings),
which are being
unleashed in the economy through government stimulus and have grown as virus restrictions have been
removed and
confidence returns. In fact, the amount saved is more than anything we have seen in recent times and is
comparable to
the mid-'70s.
Longtermtrends aggregates long term high-level financial data and displays it. I find looking at these
charts gets me away from the day-to-day "oh the stock market is down" and towards thinking about what
happens when you invest money over many years or decades.
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