And then Albert says, we are moving past the social/economic/market/ ice age.
Into an unimaginablee hellscape of dream demons and market depravity.
Or something.
From Advisor Perspectives, May 10:
To achieve its mission of reducing inflation, the Fed will keep raising rates, according to Albert Edwards, and won’t stop before the S&P 500 hits 3,000.
That is a 24.8% decline from its close yesterday of 3,991, on top of the 16.65% decline already this year.
Edwards is the global strategist for Société Générale and is based in London. He spoke virtually at John Mauldin’s Strategic Investment Conference on May 9.
The end of the ice age cometh
Edwards is known for his “ice age” theory, which he introduced in 1996. It was based on his observations of the end of the 1980s Japanese asset bubble.The main risk to Japan was thought to be outright deflation, and Edwards believed it would affect the U.S. and Europe too. He deduced that Japan’s problem was “secular stagnation,” before that concept was popularized by Larry Summers and others.
The key for Edwards was that, as inflation receded to zero, bond yields would plummet.
Japan’s CPI was 5% when its bubble burst. Equity prices fell starting in 1992. As Edwards predicted, defensive and growth stocks then performed well relative to value and cyclical stocks.
Edwards foresaw a secular shift that favored long-term bonds over equities. In the early 1990s, Edwards was warning UK pension funds, which on average had 90% in equities.
But he was wrong about equities, as they have performed well for most of this century. That, he said, was because of quantitative easing (QE). But he was right about bonds, as well as value and cyclical stocks.
“The U.S. was the one market that bucked the trend on equities,” he said, because of its tech-heavy weighting. But European equities fared poorly.
Things changed during the pandemic recession with the aggressiveness of QE. “It made things look great for a while,” Edwards said, “but even bigger asset price bubbles have been built.”
What is different is during the pandemic recession fiscal and monetary policy both worked in the same stimulatory direction....
....MUCH MORE
S&P 500 last print at 3980.
