Is That The S&P 500 And Gold Correction Finally?

The stock bears finally showed they aren‘t an extinct species – merely a seriously endangered one. Yesterday‘s close though gives them a chance to try again today, but they should be tame in expectations. While there is some chart deterioration, it‘s not nearly enough to help fuel a full-on bearish onslaught in the S&P 500. There is no serious correction starting now, nothing to really take down stocks seriously for the time being.

The Fed remains active, and monetary policy hasn‘t lost its charm (effect) just yet. Commodities and asset price inflation has been in high gear for quite some time, yet it‘s not a raging problem for Main Street as evidenced by the CPI. Food price inflation, substitution, and hedonistic adjustments in its calculation are a different cup of tea, but CPI isn‘t biting yet.

Meanwhile, the real economy recovery goes on (just check yesterday‘s Empire State Manufacturing figures for proof), even without the $1.9T stimulus and infrastructure plans. Once we see signs of strain in the job market (higher participation rate, hourly earnings, and hours worked), then the real, palpable inflation story can unfold. But we‘re talking 2022, or even 2023 to get there – and the Fed will just let it overshoot to compensate for the current and prior era.

Meanwhile, the wave of new money creation (we‘re almost at double the early 2020 Fed‘s balance sheet value – $4T give or take then vs. almost $7.5T now – and that‘s before the multiplier in commercial banks loan creation kicks in) keeps hitting the markets, going into the real economy, predictably lifting many boats. It‘s my view that we have to (and will) experience a stock market bubble accompanied by the precious metals and commodities one – to a degree, simultaneously, for the stock market is likely to get under pressure first. Again, I am talking the big picture here – not the coming weeks.

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