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02.22.2018 – The End of (Artificial) Stability

The central banks’/states’ power to maintain a permanent bull market in stocks and bonds is eroding.
There is nothing natural about the stability of the past 9 years. The bullish trends in risk assets are artificial constructs of central bank/state policies. As these policies are reduced or lose their effectiveness, the era of artificial stability is coming to a close.
The 9-year run of Bull-trend stability is ending as a result of a confluence of macro dynamics:
1. Central banks are under pressure to reduce, end or reverse their unprecedented monetary stimulus, and the consequences are unpredictable, given the market’s reliance on the certainty that “central banks have our back” is ending.
2. Interest rates / bond yields may well plummet in a global recession, but if we look at a 50-year chart of interest rates, we see a saucer-shaped bottoming in play. Technician Louise Yamada has been discussing the tendency of interest rates/bond yields to trace out a multi-year saucer bottom for over a decade, and we can now discern this.