Market Crash 2019-2020
February 1 2019 Update:
Market action in Q4 2018 was a warm-up act. It forced the Fed to move from 3 planned rate hikes in 2019 to 0. It also proved useful in terms of Greedometer and mini Greedometer data. The resulting model now has a tighter S&P500 forecast for 2019.
2018 was reminiscent of 2017 in so far as we saw the Fed and other key central banks do surprise intrusions to keep the party going and support a common view the U.S. economy is at risk of overheating (which is why the Fed had to raise the Fed Funds rate). These surprise intrusions have had an impact on the Greedometer 12 sequence, on stock, bond, and commodity markets, consumer confidence, and the economy.
All Greedometer® sequences have been stopped (at different levels of maturity) by new and increasingly desperate central bank actions -and threats of actions. However, when a sequence has been stopped, a new one loads with less risk-on holiday time than was seen before the launch of the previous sequence. This is key! The time between Greedometer sequences has obeyed an exponential decay function as follows (from 1999 to now). This clearly shows that monetary policy is reaching the end of its efficacy.
Isn’t it interesting that the velocity of M2 money in the U.S. has slowed during the same timeframe to new all time lows (granted it has climbed a little over the past year)? Monetary policy becomes less effective as velocity of money slows. So central banks have needed to take more desperate and more frequent actions.
The Greedometers show that central banks have been keeping bubbles from imploding (or imploding worse) for the past 20 years. Central banks can only keep doing this as long as their tools remain viable, and as long as their institutional leaders remain credible.
As of February 1 2019 monetary policy ammunition is nearly used up.