Long time listeners of Jerry’s radio program, Smart Money Radio on 660 The Answer in Dallas-Fort Worth have heard Jerry discuss for a year the elements that could derail the Trump economic train, particularly rising interest rates. This past week the equity markets got rattled over them.
Rolling Bear
During the week of October 8th the equity markets, led by tech stocks, suffered their worst declines since March this year when investors got the shakes over President Trump’s trade tariff showdown with China and some of America’s trade partners. This week the Dow lost 1,300 points in two days. On Friday the market seemed to rally, but fizzled. Despite having the weekend to calm down, the markets finished Monday the 15th down slightly again. Finally, Tuesday the 16th the Dow punched upward by 547, bringing a sigh of relief. Morgan Stanley chief equity strategist Mike Wilson told CNBC that he believes the U.S. equity markets have entered a “rolling bear” market:
“We continue to believe we are in the midst of a rolling bear market across all global risk assets caused by a drain in liquidity and peaking growth,” Wilson said. “Sooner or later, the rolling bear will likely be back for more.”
Though Wilson thinks that the shrinking liquidity will get worse before the end of the year, he thinks the markets may see another 10 to 15 percent decline at which point the “rolling bear” will be nearing the end and buying opportunities will present themselves.
Add another voice
Over at JP Morgan Chase, CEO Jamie Dimon also tells CNBC he too is concerned about rising interest rates, but he adds that geopolitical tensions in Europe, Central America and the Middle East could contribute to instability in the markets and the economy. In the end, he says that geopolitical flare ups don’t ultimately cause market and economic decline, but rising interest rates do. He noted that for now the economy is standing strong. “So far, we still have a strong economy in spite of these increasing overseas geopolitical issues bursting all over the place.”
Robust economy
Even though the markets quaked this past week, the good economic news keeps rolling in with record low unemployment, surging GDP, and so far low inflation. On his October 13th edition of Smart Money Radio Jerry said that the market volatility could be the beginning of the bear, but it is too early to tell. It may be a continuation of the topping process.
In any case, Jerry has been warning of this scenario for over a year. Stay tuned to the radio show in D/FW or listen to recent episodes on the website.
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