Some pundits are simply perma-bears that moan and groan about how the market will collapse taking you and civilization with it. I might seem like one of them because I’ve been writing about stock market and crypto crashes for months now.

However, I am in general a bull and the difference between me and the Jeremiahs is that when markets do crash I get bullish and I buy, and I sing how the market is going up, all the while most people are writing how it’s the end.

The stock market crash isn’t over, but it’s getting close to the end.

This is my road map:

In short, my best guess on the bottom of the S&P 500 is 3,500.

There are debatable axioms in this calculation but the key one is that the Federal Reserve knows what it’s doing, and what it is up to is clipping inflation’s wings but not stamping it out, while draining excess cash from the system by letting asset prices pull back enough to suck out the right amount of liquidity. I don’t have a precise model for the effect on liquidity of a stock market crash, but so far more than $10 trillion of asset value and thereby available collateral has been destroyed in the U.S. markets. While this might not have a 1:1 multiplier to the money supply injected by the Federal Reserve during Covid it will have a strong counteracting deflationary effect without the Fed having to deal hammer blows to the “real economy.”

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This is no free market. Real estate and stocks are core to the American way, vital, and it turns out manageable to the government and its regulators – and they’ve been curating them for over a decade now.

There will be no systemic failure, only a series of haircuts to wealth as the post-Covid economic environment is configured.

That is my current thesis and if it is correct we are approaching levels where support for assets prices will reappear. It will be at a point to create an easing in inflation while not collapsing it. A couple of years of elevated inflation and sideways trading for assets will see the process over and the economy and markets will be rebalanced and ready to move ahead.

What about the Nasdaq and the tech darlings? There, too, the terminus of this crash is close. 10,000 is a no-brainer call and 9,000 is a possibility.

In a free market it would be 5,000, but this isn’t, so a systemic failure will be stopped before it begins.

Without the Federal Reserve this would be “game over” for the markets for a generation, in the same way as it would have been in the early days of Covid had the Fed and government not galloped to the rescue. However, now that markets aren’t allowed to collapse, it would be very strange if the regulators would let the market take its course and throw the American economy into the abyss.

For me, 3,500 on the S&P 500 is where the line in the sand is. It could be lower but it won’t be far from there.

If there is no intention to support assets in a crash then downsides are mighty. As such, there is no rush to try and guess the bottom. Once a bottom is established on the chart, you can ‘go shop,’ because the bottom will be politically driven not market driven.

This won’t be ‘buying the dip’ because this is a crash. Buying the crash is way better and a lot more profitable, so long as you take your time about it. Better to be late than early.

It’s going to be a rough summer but autumn will be better.

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