I’m pretty bearish, but that doesn’t mean the market is going down. Many people look at the index and see the bubble, but even if it’s correct, it doesn’t mean that the bubble will burst sooner or later.
Many say the market is too expensive to go up forever, but they are wrong. There are all sorts of scenarios that can mean that the market will be much higher and never go down.
People like me say Apple
This is one diagram that illustrates how the value can rise and continue to rise.
This old $ 20 is now worth about $ 2,100 as a piece of gold. The price has increased 100 times, but it definitely remains the same. Stamps can cost $ 4 billion in the event of hyperinflation. As you can see, there is a cone of probabilities about where the index goes from here and whether it is economic growth or not.
This is just the starting point. What we need is a clear roadmap, and fortunately it is. There are actually two.
The only thing that drives the price of an asset, and in general about it, is the Federal Reserve. This is a chart of fresh money they printed, or, as they say, a chart of their balance sheet growth:
As you might imagine the recent slowdown in acceleration, this chart is important, but it has a clearer signal for investors.
Taking it from the beginning of the year, it’s even more ridiculously linear:
Really this is all you need to know. Because while the Fed is modifying the market, this chart goes straight, and when it stops straight, it goes straight down.
I try to make it clearer:
Therefore, the debate between inflationists and deflation is settled by the progress of the S & P 500. Because, to keep this trajectory, the Fed needs to continue printing, which inflates and, strangely enough, the value of money lowers the price, so the value of the asset does not necessarily rise, and vice versa. ..
The S & P 500 trends are very tight, but that’s the only trend you need to know. Can it be retained? The answer is yes, you can. Can you hold it without strong inflation? No.
Can the S & P 500 slow down decently and still keep the watcher in faith? Maybe.
Will deflation occur? If that were to happen in the future, we would see stocks soar from this channel and plummet long before it happened.
I think there will be an attempt to maintain the market on a course that suggests a less hot inflationary environment after a slower rise. However, there are many things that go wrong, especially with the Covid-19 variant, so it’s unlikely that you’ll get back to normal right away.
The world is still digging holes in the economy and it will take a long time to fill them. If history goes by, the value of money is likely to be rebased, and if it’s the future, the S & P 500 will continue to go straight.