Is this the Stock Market Top?

Is this the Stock Market Top? By Charles Hugh Smith.

The consensus seems to be that the stock market is on its way to much higher levels, and soon. The near-term targets for the S&P 500 (SPX, currently around 3,235) range from 3,500 to 4,000, with longer-term targets reaching “the sky’s the limit.”

The consensus reasoning goes like this:

  • Central banks can print a lot more money
  • Stocks rise when central banks print more money.

The history of the 2009-2019 era strongly supports this simple cause-effect, and so just about everyone is on the same side of the boat, the “don’t fight the Fed” side of ever-higher stock multiples and ever-higher prices.

Simply put: sales and profits no longer matter, the only thing that matters is whether central banks are printing more money. And since we all know they’ll have to print more money to keep the flying pig (the stock market) aloft, then it follows as night follows day that stocks will rise essentially forever.

As soon as the consensus has settled complacently on one side of the boat, contrarians take notice as history has a perverse habit of foiling any overwhelmingly complacent consensus.

The chickens are coming home to roost for the central banks. And it’s not just the all time high debt (compared to the size of the economy)….

As a case study, let’s look at two charts of Apple: operating income and its stock price. Interestingly, operating income has been stagnant to down for years, while the stock price has gone parabolic.

Uh oh parabolic. This always ends badly.

James McShirley:

Stocks gone wild … It looks like equities are gunning for that mythical 30k Dow/10k Nasdaq.

The fact that TSLA is the most valuable automaker in the history of the U.S. says everything about the bubblelicious state of affairs in irrational exuberance investing.

The market now completely dances to the tune of the bureaucrats who set interest rates and print money. It’s out in the open now, and “everyone” knows.

Optimal allocation of resources? That started dying when markets got replaced by central bank dictates a century ago. Now we are presumably at the end phase, when the markets just watch the bureaucrats and the bureaucrats print money if the “markets” swoon. Very corrupt. It enriches the asset holders, but that is an increasingly narrow section of society. No actual physical goods or useful services are produced in this game, it’s just asset shuffling that silently siphons off real wealth from everyone else to the users of the newly created money and the rising asset markets.

For people left out of this game, who cannot even begin to buy a house, even socialism might start to look good.