Something weird happened overnight.
US stocks finished down. Not by much. But there was more red than green.
The S&P 500 fell 0.34% while the NASDAQ declined nearly 0.8%.
What is going on?
I’m as confused as you.
It’s not for want of trying on behalf of the ‘authorities’.
Overnight, the European Central Bank (ECB) added to the general insanity of 2020, by announcing more stimulus. Because, you know, they haven’t quite done enough. As the Financial Times reports:
‘The European Central Bank will buy an extra €600bn of bonds in a bid to revive the eurozone’s pandemic-stricken economy, it announced on Thursday, while slashing its forecasts for growth and inflation.
‘ECB president Christine Lagarde said the region was “experiencing an unprecedented contraction”, adding that “severe job and income losses and exceptionally elevated uncertainty” had led to a “significant fall” in both consumer spending and investment.
‘The move to increase the ECB’s pandemic emergency purchase programme (PEPP) was larger than most economists’ expectations, taking it to €1.35tn in total.
‘The ECB also extended the scheme until at least June 2021, leaving it on track to buy a record €1.4tn of assets this year across all its stimulus programmes. That would increase its asset portfolio to more than €4tn, about a third of eurozone gross domestic product.’
It didn’t stop the euro continuing its slingshot rally against the US dollar. It’s soared nearly 5% in the space of a few weeks.
Which is probably why the ECB just decided to monetise a few more trillion in debt. No one wants a strong currency.
And just while I’m on Europe, how do you think 10 years of massive stimulus and near zero interest rates have gone?
The economy is still a basket case
And judging by the performance of Europe’s banks, it is not going to get better. Have a look at the chart below. The index broke down to multiyear lows in March. No wonder the ECB needs to keep buying. Their banks are practically dead.
This is what happens when you constantly try to prop up companies and industries that have made bad decisions. There is no ‘clean out’. The clowns who presided over the bad decisions remain in positions of authority.
Instead of getting the boot, they are rewarded.
But you know how it works, dear reader.
It works like this in Australia too.
Although we might be a few years behind Europe.
Check out the weekly chart of the ASX 200 Financials Index, which is basically the performance of the Big Four banks…
While our banks ‘only’ bottomed at 2012 levels in March, this is an ugly looking chart. Yes, the banks are enjoying a nice bounce now. And perhaps it will continue.
But from a probability perspective, long-term investors are swimming against the tide here.
Sure, as the economy continues to open back up, you could see the rally extend up to former support around the green line. But the breakdown in March is kind of a big deal.
The tricky thing is this breakdown is related to a government-imposed economic shutdown. There is no real precedent for it.
So I guess you could argue that when our political masters give us back our freedoms, banks will bounce back to previous levels. I don’t think it works like that, but you can always hope…
The stock market doesn’t care
Speaking of government-imposed shutdowns, is Victorian Premier Dan Andrews the biggest phoney politician in the world right now? Believe me, that’s saying something.
Andrews has presided over the destruction of countless small businesses in Victoria, threatened companies with fines if they attempt to reunite their workforces in the office, and done parents’ heads in by keeping kids at home for much longer than necessary.
All for our own good, of course.
We can’t have weddings, can’t go to funerals and say our last goodbyes to loved ones…
We can’t attend church, can’t get kids out and moving at junior sports…
But we CAN congregate in the tens of thousands for a protest march.
This is the bloke who backs China over his own Federal government.
He is without principle.
What is it with the left these days?
They have gone rabid.
My anger (and the anger of millions of other Aussies) has nothing to do with the cause behind the march, which is a noble one.
But how, as a leader, can you put countless livelihoods under threat, and families under stress and financial strain, because of the risk of infection yet allow a gathering of thousands?
If I’m a small business owner, I would be livid. In fact, if you’re someone with any sense of perspective and fairness, you’re going to be outraged.
The real tragedy behind the death of George Floyd is that many on the extreme left are using it as a screen to promote violence and civil unrest. They just want the system burned down. Their agenda has nothing to do with ‘black lives matter’ and everything to do with division and playing the race card. And the far-left democrats are wilfully encouraging it.
Meanwhile, being the amoral beast that it is, the stock market doesn’t care…