Today was a rough week for bonds and stocks, following a four-decade-high CPI print and the lowest Consumer Confidence reading … ever.
USD and gold were the top performing widely held assets. As we argued a year or two ago when the Fed was going nuts on monetary policy and the administration on fiscal policy, extremes beget extremes. We have a ways to go. In light of the “interesting” market action, it might be interesting to take a look at Synthetic Systems’ latest thoughts. Herewith is a fresh-off-the-presses run as of today’s market close.
This, by the way, is the “S” version referred to recently in Synthetic Systems Update, chosen because it takes only a few minutes to run. The “official” SS forecast remains the last quarterly run at the end of March, but this is interesting because it highlights where the greatest uncertainties lie and in which direction.
It’s also noteworthy not only for the outlook but for the record of market movement to date. This is the same for all versions of SS. Notice that despite first impressions, SS believes it has gotten the stock market just about right. Instead where it’s been wrong so far is in underestimating the magnitude of dollar strength. Dollars have risen sharply in value, with the result that it takes fewer of them to buy the same stuff. In short, while values have so far held up, prices have declined.
That may be about to change, however, if “quick” Systems has anything to say about it. The turning point for stocks and copper into bonds and gold has been softened or rounded and moved ahead by nearly a quarter. This is about the uncertainty limit of the existing SS version anyway, so it’s not entirely new, but this is its first explicit indication that the markets could be in transition as soon as … now.