MARKETS: Expect MASSIVE Price Action Distortions to Worsen. By Gregory Mannarino

From Greg M

MARKETS: Expect MASSIVE Price Action Distortions to Worsen.

By Gregory Mannarino TradersChoice.net

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Despite a world economy contracting at its fastest pace on record, stock prices are rising at a staggering pace. Here in the United States alone in just the first three months of the year, the stock market has hit a new record TWENTY TIMES!

There are several dynamics in play right now which are driving stocks higher. Let’s outline a few of these dynamics to better gauge if this phenomenon will continue, or not.

Mass layoffs.

Beginning this year, multiple corporations have announced, and continue to announce, mass layoffs. Wall Street has subsequently rewarded these companies for laying off workers by bidding their stocks higher.

A rapidly slowing economy.

With ongoing nonstop round after round of continuing bad economic news, stock investors are betting on central banks lowering rates despite inflation continuing to rise.

The promise of more easy money.

The Swiss National Bank just last week, made a surprise rate cut. This is significant as they have become the first major central bank to do so. With that, also last week, Federal Reserve Chairman J. Powell following the Federal Open Market Committee announcement on monetary policy all but assured the stock market that despite rising inflation, the Fed. Will be cutting rates later in the year. (It is also my firm belief that both the Federal Reserve and the European Central Bank will be working in lockstep cutting rates/artificially suppressing rates beginning later this year).

When a central bank cuts rates it must create epic sums of currency out of thin air and buy more debt, this mechanism allows central banks to inflate, which is how they consolidate more power.  The mechanism of suppressed rates, by design, opens a doorway for more cash to flow into risk assets/stocks.

Massive government spending.

Investors are expecting world governments to continue to run record debts and deficits for as far as the eye can see and beyond.

The mechanism of skyrocketing debts and deficits, along with central banks cutting rates is itself massively inflationary meaning, it reduces the purchasing power of the currency. When a currency loses purchasing power it takes more devalued currency to buy anything, even shares of company stock.

Considering the current dynamics in play, we can fully expect that price action distortions regarding stock prices will continue. With that, we can also expect that the eventual outcome will be very, very, bad.