A cura di Walter Snyder, WWS Swiss Financial Consulting SA
It is well-known that that the last period before Christmas has usually been kind to the stock markets and that a rally just before Christmas is likely to happen. That remains to be seen for 2018, which has not so far had a happy ending for equities. This Newsletter has repeatedly referred to the many disturbing developments that have taken place and that could determine a very poor 2019. The Fed is still intent on raising interest rates.
The likelihood of an inverted yield curve is extremely high, and that signals that a recession will probably follow in 12 to 24 months. Even so, experience has shown that markets can rally even up to 20% before the situation worsens and a downturn ensues. The amount of federal debt, now practically $21.8 trillion, has finally begun to worry a wide spectrum of the investing world. Add to that the excessive corporate debt and the scene is set for a tragedy. The oil fracking Ponzi scheme has been burning cash at an alarming rate thanks to investors that buy up stock offerings and lenders that keep the oil wells drilling.
Now there is a trade war with a 90-day truce but with no guarantee that an agreement will finally be reached. Brexit will soon be resolved one way or another just as the ECB has communicated that it intends to end the European version of QE. With a recession on the horizon, it unlikely that companies will be able to continue the huge stock buy-back programmes that have buoyed up the stock markets. ZIRP and NIRP have resulted in tremendous capital misallocations that will make it more difficult for companies to get through the difficult years that will come sooner or later.
So there is not much cheer coming from financial markets this Christmas. Readers of the Newsletter may or may not be cheered up by the prospect that Wally`s Newsletter will not be sent out to them for about two months because of a prolonged absence. There will be some Newsletters appearing occasionally in Market Plus (www.marketplus.ch) and also the website Finanza Operativa (www.finanzaoperativa.it) in addition to articles accepted for publication in Seeking Alpha (https://seekingalpha.com) . Regular posts will resume after 20th February.
Wally`s Newsletter wishes everyone a Merry Christmas and a Happy New Year along with good health for 2019 as well as with Best Wishes for a successful year in the financial markets in a hopefully peaceful world.