The stock market is strong when the economy is weak. Why? Because the stock market responds to the injection of liquidity orchestrated by the Fed to stimulate the economy.
Finally, the economy responds to the massive easing. Commodities, inflation, and interest rates rise. This is the beginning of the end for the bull market.
The economy eventually slows down or enter into a recession. The Fed eases again and the show starts all over again.
What is disturbing right now is that the bank stocks (click on the chart to enlarge) remain weak. Does this mean this is not a typical business cycle? Stay tuned.
To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.
I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.
George Dagnino, PhD
Editor, since 1977
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