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Fear of recession greatly exaggerated

Multiple forms of uncertainty have converged to spook the stock market to its deepest correction in a decade.  A full bear market could occur with the next major support level at S&P500 2300.

Where’s the bottom?  I have no idea.  What I do know is that at some point, there will be a bottom and the market will rebound.  I’m not worried about a “collapse”.

At this point in the cycle, a recession is the most justifiable reason for a downturn.  Whether induced organically or by Federal Reserve policy.  However, I don’t think recessionary conditions are yet ripe.

Note the chart showing the spread between the Fed Funds Rate and the 10 Year Treasury yield.  During the seven recessions (shaded vertical bars) that took place over the past 45 year, all but one (1990) occurred from a rising negative value.

So far, the current spread hasn’t yet even turned negative.  I don’t foresee a recession in 2019.

As to the stock market, I expect a rebound and eventually new record highs.  Corporate profits are sound and stock market valuations are low.

Watch a quick 2 minute video discussing the current low valuations,

After Christmas Sale: stock market–  https://youtu.be/ZD2xcbAVHzg

As always, invest with caution.

Merry Christmas !


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