Stocks Are On The Brink Of A Grizzly Bear Market

Stocks Are On The Brink Of A Grizzly Bear Market

The U. S. stock market is one step away from a chain of events that I think could mark the onset of a durable bear market. The most common bull case I hear is that there is still too much money chasing too few assets - i. e., liquidity. Yes, there's an enormous amount of money in our system, but that matters less than the fact the rate at which it's coming in is likely peaking. The rate of liquidity entering markets has been slowing since the Federal Reserve fixed the rate of monthly bond purchases last summer. It's not a coincidence the Nasdaq's NDAQ trailing valuation has struggled since. Right now, the steroid boost of direct-deposit stimulus checks is waning, and the eventual drawdown of Covid-era unemployment benefits lingers. The next stimulus bill will be more politically difficult to pass and will likely have strings attached via taxes. Even if not, such "infrastructure" spending will likely show up more obviously in cyclical-stock earnings than broad market valuation froth. At the end of the day, that's what it all boils down to: froth. With practical-joke crypto tokens worth more than Chipotle and Ford's market cap, it's never been more obvious