The following video is brought to you courtesy of the Epic Economist YouTube Channel. Click the video below to watch it now.
As the Fed pumps billions of virtually worthless dollars into the economy, they have cushioned the worst effects of a pandemic-induced crash.
Therefore, even as over 1 million Americans continue to file new claims for unemployment benefits each week, stocks just keep rising. Paradoxically, it seems like the worse the news has gotten, the higher the stock market has climbed. This is because the two have become dangerously tied together. The higher the economic toll taken by the pandemic, the more money the Fed prints to offset the effects. The more money the Fed prints, the higher stock prices soar.
Now, the Nasdaq is making its final run before it goes vertical. Historically, this indicator signals that a stock market bubble is just about to burst. For traders, this is an ideal situation, but for speculators that believe the markets have more space to rise, there will be a serious price to pay. Even if market prices continue to drive upwards, the surge won’t last long. Whether stocks make it through the fall or whether they collapse tomorrow, there is going to be a crash in 2020 that dwarfs those we have seen before. Unless the Fed puts appropriate policy in place to reduce the devastation of the bubble, the crash will be swift and enormous.
A majority of the newly printed money the federal government is injecting into the economy goes directly towards equities. This corrupted quantitative easing actually supports asset prices and distributes wealth to those already at the top of the pyramid first, before it trickles down in smaller and smaller amounts to the masses at the bottom. Now, the Fed’s printing is contributing directly to a growing bubble of financial assets that they will soon lose their handle on as the markets spiral into chaos.
A Nasdaq bull vertical would move us towards a new and terrifying phase of the economic collapse. Frightened investors will rush to exit the market as wealth is destroyed on an unprecedented scale. It is notable that, this week, Nasdaq reversed sharply in relation to the S&P, marking the largest relative underperformance since 2009, during the Great Recession.
The Federal Reserve needs to handle its business, and fast. Already, we seem to be in the final surge before a major collapse. If we do in fact witness the bubble burst in the weeks or months ahead, it will be a second devastating blow to the US and the global economy as both continue to grapple with the havoc wrought by the ongoing health crisis. If this sounds familiar to you, that’s because it is strikingly similar to the story of the Great Depression, when a stock market crash was followed by a banking crisis in a dire one-two punch. In this case, it will be more like widespread lockdowns and economic stagnation followed by a stock market crash.
If Nasdaq continues to approach a vertical, the crash will be hard to miss, so those in power should have the foresight to act now before it’s too late.
American investor Jim Rogers, hedge fund manager David Tepper, and entrepreneur Mark Cuban are just a few of the fund managers who have been alerting the public to a 2020 stock market crash.
Of course, Wall Street took this as their opportunity to boast that we were on our way to recovery, having already seen the worst of the economic collapse. The term V-shaped recovery was making its rounds as optimists anticipated a speedy return to normal.
Historically, the story ends a bit differently. During the Great Depression, the Dow Jones Industrial Average dropped a staggering 89.2 percent from 1929 to 1932. Similar to what is playing out today, that time frame did include a few misleading rallies. Stocks spiked 28.6 percent from mid November 1929 to April 20, 1930. They also staged a 13.2 percent increase from June 22 to September 7, 1930. Stocks rallied once again–this time 17.5 percent–from January to February in 1931. And they did it again between the end of May and the end of June that same year, climbing 22.2 percent.
If we can learn anything from this period of history, it is that rallies do not indicate long term trends. Despite double-digit recoveries, the Great Depression was an absolutely devastating event that changed the lives of countless individuals, destroyed businesses, and plagued the US and global economies for years.
As the stock market seems like smooth sailing, remember that the pandemic is far from over. The economic depression is only beginning. Social unrest is getting worse. And, even though the bear market rallies instill false hope, the stock market has much further to fall.”