BarroMetrics Views: US Indices 2014-06-17
Firstly, thanks to all the emails enquiring if I am well.
Yes, now fine.
The US stock market is an interesting state. Despite the ‘favourable’ employment data, the comments by the FED show that it is worried about the state of US employment and growth.
In his recent article, Long-Term Parking, Ben Hunt argues that we won’t see an inflation problem until we see the reserves sitting at the St Louis Fed (Figure 1) flow to Main Street – with this I agree. He also states that he believes that the reserves won’t be passed on to Main Street for a long, long time. With this I disagree.
The Cantor shock result shows there are under currents in US politics that will not be ignored.
The main stream press has been ignoring the extent of the middle class discontent. This is the class that has been bearing the brunt of the the Fed policies. Their living standard has fallen to levels last seen in 1988; and they are bearing the brunt of unemployment: if ShadowStats is correct, the current unemployment is at 23% and not falling.
If I have analysed the US political scene correctly, then:
- The Tea Party indicates will win the majority of the pre-selection seats for the Senate mid-term elections;
- Despite the main stream media hype to the contrary, the Republicans (with the Tea Party candidates) will gain control of Congress.
If this comes to pass, we may see a new wind in Washington that will lead to a dismantling of QE In the meantime, we still have FACTA looming on the horizon.