Friday, January 27, 2017
Our current analysis of the various technical and economic market cycles, including evaluating psychological levels of "greed and fear," indicate that the multi-decade bull market in stocks could be ending, in the very near future.
The Federal Reserve's quantitive easing stimulus, and corporate stock buybacks programs have artificially supported the global stock markets for the last few years; however, their effectiveness is diminishing or no longer exist.
Economic conditions are vastly different today, with the new Trump administration, compared to the beginning of the 1982 bull market in stocks, through the Regan era.
For example, Reagan had virtually no government debt ($1 trillion or 6% of GDP), the flexibility and effectiveness of lowering interest-rates, as well as reducing tax rates, resulting in strong economic growth, between 6% to 8%.
Trump, on the other hand, has inherited vast amounts of government debt ($20 trillion or 105% of GDP), and already low interest rates. Additionally, lowering tax rates even further may create some short-term growth, but will not reduce the already-ballooning level of government debt. There is fierce opposition in the US House and Senate for raising the debt ceiling limit, which will have to be voted on in the coming months. These reasons and other uncertainties are making either a economic recession or depression an eventual reality.
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Posted by Private Wealth Management at 7:40 PM