hisah wrote:In a surprise move, the Bank of Japan has introduced a negative interest rate.Perfect storm! Capital flight into USD from yen and the euro now cemented. This ensures that bond market debt bomb is going to destroy many govts as the QE effects amplify the collapse. The only option will be to pack all that cash into equities as investors ditch public debt markets.
On the next global equities flash crash load up as much as possible and watch as equities recover the flash crash in a vertical reversal to new all time highs! Those that choose to stick with govt bonds will jump off balconies as their capital is vapourized...
Return of capital rather than return on capital is the shift that will blow up the public debt market. For Japan, NIRP was a question of when not if...the initial flight of capital into the yen as a safe haven was baffling to say the least. They were running out of JGB monetization room so this is a hail Mary move.
Let's see how long the fed will stick to their rate hiking policy. Q4 GDP could only muster a measly 0.69% plus nearly non-existent inflation... Good luck hiking in those conditions.
I think equities are on a one way ticket down a rabbit hole. It's very hard to postulate a scenario where all time highs are breached at least for this year.
The turmoil in bonds is developing a lot slower than the one in equities. In my opinion, stocks will continue the sell off, capital flight into USD will mostly park in treasuries with some spillover into real estate. That will set up a final rally in bonds for the perfect bull trap. When bonds and real estate crash as they inevitably will, stocks are going to be the largest beneficiaries. We may be looking at mid next year for this to pan out.
The main purpose of the stock market is to make fools of as many people as possible.