Economic Outlook

Market Correction: Could We Kick off 2021 With a “Vicious” 10-15% Pullback?

Stop me if you’ve heard this one before: the stock market looks pretty frothy going into the new year, and it’s coming in hot, perhaps too hot. Given the rally we’ve had since those depths of March, it definitely feels as though we’re overdue for another vicious market correction in excess of 10%.

Still, there are no guarantees that the froth will be cut off this market anytime soon. Although the folks at CFRA did recently warn investors to brace themselves, as they thought the stock market was “vulnerable to a pullback” over the near-term. CFRA points out that recovery expectations are a tad on the high side, which could set the stage for a first-quarter pullback. CLICK for complete article

Why There Is Literally No “Cash On The Sidelines.”

In the later stages of a bull market advance, the financial media and Wall Street analysts start seeking out rationalizations to support their bullish views. One common refrain is “there are trillions of dollars in cash sitting on the sidelines just waiting to come into the market.” 

For example, Barron’s recently penned the following:

“There is record amounts of cash sitting in checking accounts of American households—and for optimistic investors, it’s just one more reason the stock market should keep pushing higher. 

Yahoo! Finance also jumped on the claim:

“It should also come as no surprise that there’s never been so much cash sitting on the sidelines — nearly $5 trillion, as a matter of fact. This is significantly above the record $3.8 trillion in cash set back in January 2009 during the financial crisis!”

McKinsey & Co also published the following graphic.

cash on the sidelines, Why There Is Literally No “Cash On The Sidelines.”

See. There are just tons of “cash on the sidelines” waiting to flow into the market.

Except there isn’t. CLICK for complete article

Mike’s Editorial

Canada enters 2021 as an increasingly divided country. Mike has a straightforward suggestion for what we can do personally do to promote a more tolerant, harmonious society but most will ignore it.

  1. Economic growth
  2. Raising taxes
  3. Inflation
  4. Reduction of government services.

Cuts aren’t on the table and no indication that economic growth is a priority…so that leaves taxes and inflation…be prepared.

“A country can’t inflate its way out of debt. Inflation raises the cost of living, reduces the real value of incomes, harms creditors at the expense of debtors, raises interest rates. Inflation destroys the value of a currency. Stable money is as important as the Constitution.”
Brian Wesbury, Chief Economist, First Trust Portfolios

 

“The professional class of politicians, media people, scientists and credentialed chatterers care about business in the abstract—“small-business bankruptcies” concern them; they have a sense some people will lose livelihoods. But they have no particular heart for them. They never betray any appreciation of the romance of opening a place and being your own boss and offering a good product and being part of the town and being a success. They don’t understand the sacrifice it takes. Or that the shuttering of a store is, literally, the death of a dream.”

Peggy Noonan, WSJ columnist