Same old, same old.
If it’s Monday, we must be recovering back towards Toppy Tuesday’s highs so we will wait patiently to begin shorting again. With Trump out of the country, we haven’t had a crisis all weekend and they are keeping the President too busy to tweet – so all is well(ish) at the moment. Unfortunately, no one is keeping the Fed from speaking and we have 6, yes SIX Fed speeches TODAY and then 2 tomorrow, 2 on Wednesday (and the Fed minutes at 2pm) 3 on Thursday and one on Friday for 14 Fed speeches in 5 days – a new record!
Endless Fed meddling is likely to give us a wild week leading up to Friday’s Q1 GDP Report, which will be the 2nd estimate but the Atlanta Fed has already pegged Q2 GDP growth at a blistering 4.1% (almost double the first Q1 estimate of 2.3%) and, if true, the Fed has no choice but to tighten at the next meeting before we whip into an inflation crisis.
We’re already seeing tightening labor hammer productivity while driving up wages and we could be looking at 3-4% inflation rates by the end of 2017, which means you need to deduct that from your market gains to determine your buying power and, more importantly, deducting even 3% from bond gains pushes most of them into negative territory – a factor that could stampede even more money into the markets in search of inflation-fighting returns.
That’s going to blow us off the scale re. valuation metrics on the S&P 500, which is already showing overvalued levels on 18 of 20 of the metrics tracked by Bank of America (BAC) with the Shiller P/E Ratio a whopping 74% above average and the Market Cap of the S&P is almost double its usual percentage of our GDP:
As noted in last week’s Live Trading Webinar (replay available here), we have no shortage of long positions and we took advantage of the dip to add a few to our Member Portfolios last week but, on the whole, we’re still aiming to keep a mainly neutral stance, waiting for the market to decide if it wants to break up or break down from S&P 2,400.