I agree, Heinz, and eventually the correlation will also prove out for this market. I think this correlation is not per se cause and effect, but rather driven by the boom-bust cycle. When the economy tops, recession follows, which drives unemployment up, and vice versa. To me the question is not whether we will go into recession, but when. It is possible that we may meander at these levels for some time, and the market will continue to run for a while.
I don't think this week is representative of a top, it was caused by extraneous factors, Dear Abby, Waco Janet, and margin calls. The real top will come when no one is expecting it and when most investors are on the wrong side. There is too much bearish sentiment at the moment for that to happen.
My bet is that AG's interest rate hikes will continue and force a recession, probably in the 3rd or 4th quarters. Of course, between his rate hikes and the money he keeps pumping into the economy, the tight rope act may continue for a while, which will make the eventual fall much harder.
You know, I really am bullish for the next 6-7 years, but with what I have seen over the last six months or so I'm glad I'm about 60% cash for the time being. We need a good shakeout for a few quarters. |
