Politics and government action has become very weird these days. First of all, the US government calls an inflation bill that spends $430 billion of taxpayer money an “Inflation Reduction Act.” Then, we have two straight quarters of negative economic growth, and leaders deny we are in a recession. The stock market rises on the fantastic news that inflation was only 8.5% in July. Home prices are unaffordable, but the good news for our politicians are that housing is less “less affordable” than expected in July.
Regardless, markets have rallied and the momentum in this market is positive. Capital continues to flow into the market. Just a little less bad news has forced short-sellers out of their positions. The squeeze continues. There isn’t a major catalyst that could dramatically shift sentiment until the August jobs report on September 2.
So, all must be in good order. As long as the market is going up, we are save. But the market is not the economy and the economy is not the market. This is an important message and explains why sometimes such rallies occur in periods of difficult economic time. But eventually, reality returns unforgiving ways. We have to be cautious about reality.
Just remember, real wages have gone down the pipe, real GDP shows we are in a recession and productivity has worsened since a long time. But why are politicians so wrong about everything? And why is there no blowback against the consequences of terrible policies or the failure of their actions?
For me, this is a great mystery!
Sven Franssen