Market Correction and the House of Cards

I have been pretty bearish (i.e. a negative outlook) on the market since the spring and recommended positioning more defensively. In my September Newsletter I go into some details about some of the red flags I am seeing in the market as well as a catalyst that could create a significant downturn. Typically, I charge subscribers $49 per quarter for this Newsletter, but I am waiving that fee for a short time. If you would like to receive the entire September Newsletter for FREE. Send me an email at charles@adaptfirst.com. Here's a sample from the September Newsletter...

September 2018 Newsletter

U.S. Outlook

Just about every day after I read my morning briefing on global markets, I’m reminded of Frank Underwood and the TV show “House of Cards” (an awesome Netflix Series imo) where politicians Frank and Claire Underwood will stop at nothing to conquer Washington. Their often nefarious actions gain them power, but at any moment, it could fall apart – House of Cards. Similarly, it seems to me that the steady melt up in the market is being founded on what looks like bricks, but really, they are cards. The real question is what will be the puff of wind or table nudge that makes it all come crumbling down? Before we get to that, let’s look at some of the cards…

Recession Warning.png

“It’s different this time!!” How many times have we heard that? The latest sighting of this well known phrase has been in the ongoing debate regarding yield curve inversion. It’s well documented that inversion almost always precedes recessions, so the chart above is certainly ominous. Short rates continue to climb and the Fed is content on policy normalization. I think they should have normalized policy a long time ago, but the more troubling thing is why haven’t long term rates risen? Long dated treasuries yields are theoretically a proxy for growth. If the economy is so great, why aren’t these rates going up more so that the curve “shifts” up rather than inverting? In my opinion, it’s confirmation that longer term, you have numerous cyclical and structural headwinds and we are at peak growth. More on this later…

ResearchCharles Freeman