This Is Good News for Stock Market Performance This Year
In this issue, I will be examining a wide range of factors that are set to become important in the years ahead.
While the impact of AI on the labour market is widely debated, does this necessarily lead to an increase in unemployment? So far, there is no evidence to suggest this. In fact, unemployment rates have remained low, even in the US, and there is also no evidence of downward pressure on wages.
I will therefore devote a substantial section to the labour market and the spending power of US consumers, which varies considerably depending on the demographic structure, but which still appears to be robust overall.
The new Federal Reserve Chairman, Kevin Warsh, will find it impossible to cut interest rates in the short term. Inflation trends are preventing this, even though he will probably still want to do Donald Trump a favour as soon as possible. However, I also believe that he will significantly reduce the likelihood of short-term interest rates rising in the US, which is one reason why I think US bond yields will rise and the USD will subsequently fall.
Developments in the Stock Market Will Become Very Important
Firstly, I expect the stock market to perform strongly in the coming months rather than face the risk of a setback. I’ll discuss this in more detail below.
The valuation levels of the US stock market, particularly certain technology stocks, are unprecedented in historical terms. I find it difficult to speak about stock market valuations because the intrinsic value of many stocks is so unclear and therefore difficult to quantify. Pricing is a partially rational act by market participants who sometimes base their decisions on overly optimistic assumptions.
There Is a Lot of Economic Activity in the U.S.
Despite the multiple crises that have hit the world over the past 18 months under ‘Trump 2.0’, the situation remains surprisingly robust in terms of the stock markets, the USD, U.S. consumers and global trade.
There is ample evidence to suggest that we will see a very positive trend in the coming months, and possibly even over the next two years. By this, I am referring to the real economy, which has strong drivers.
Over the past 10 years, the scenarios I developed in my first two books have largely played out as I anticipated, which I find reassuring. I also consider the scenario described in my third book, Whip-Swing Markets, to be highly likely. However, I don’t think companies are sufficiently prepared for this. Make the most of the time you have left.
In the short and medium term, positive development will be contributed to by the end of uncertainty in the Strait of Hormuz and possibly in Ukraine within a year, and the resulting removal of barriers to investment and consumption.
In the last issue, I pointed out that Europe, and Asia in particular, have cause for concern and must adapt their energy supplies. While this will lead to significant investment and increased economic activity, it will also result in more debt for these economic regions.
We are experiencing an investment boom, which is already underway in the US and, to some extent, China, and this trend is now spreading globally. The 2020s are set to be a good decade. Growth won’t be equally strong everywhere, and some industries won’t experience it at all. But overall, things are looking good.
