With the stock market in free fall mode, everyone is wondering when the carnage will stop.
Our market has recently hitting record highs meaning every single dip in our lifetime has worked as a great buying opportunity for those patience enough to ride out the tough times. Will that be the case again? Or will stocks crumble to fresh lows and never work their way back to record levels?
The bond market has been strong. With the FED announcing the taper last year and cutting its purchases in 2014, bonds were supposed to take a hit. They have performed exactly the opposite of general consensus. There is a tremendous amount of money being stashed away at low rates of return. A few years ago the massive asset price manipulation scheme of the central banks was supposed to create this inflationary event that would send interest rates soaring. Yet we've seen just the opposite.
This a fabulous read on deflation this morning from the Wall Street Journal
I think deflation is more of a threat now than its been in a long long time. The last thing any central bank wants in deflation and that is why I think the dust will settle on this recent pull back in stock prices. Rising out of this dust will be stocks as they move again to record highs. The fuel for this move will be the continued commitment of central banks globally to stave off any and all risks of deflation.
The eight reasons to be buying this market?
The Federal Reserve
The European Central Bank
The Bank Of England
The Bank of Japan
The Bank of Canada
The Reserve Bank of Australia
The Reserve Bank of New Zealand
The Swiss National Bank
The central banks have been hell bent on restoring growth to the world economy. At the risk of drawing in the growth of future years, they have embarked upon unprecedented policies aimed at providing a prosperous future.
The fear is deflation. Deflation deflation deflation. They will fight it at all costs, and this fight will lead to even higher stock prices.