Over the past few weeks, I’ve written a number of articles about why stock prices are due to take a nosedive soon.
I’ve had my eye on January for some time because a confluence of factors are all coming together in Q1 2018, creating a “perfect storm.”
The Fed is not known for its powers of early recognition. The next recession, whenever it comes, will be well under way before the Fed gets a clue. Officially it takes 2 quarters in a row of falling GDP for the NBER to call an official recession. By the time that second GDP report comes out a recession will have already been under way for 7-9 months. The Fed wouldn’t loosen policy until at least then. With no economic slowdown even in sight, it is virtually certain that tightening money will be with us at least through most, if not all of this year.
That’s plenty of time for tight monetary policy, which the Fed euphemistically calls “normalization,” to cause considerable damage to stock prices. It hasn’t started yet, but a series of red flags in the first quarter suggests that that time is coming.