If they had set out to intentionally break the system, they couldn't have done better. The S&P 500 is trading at a PE ratio of 38, a level that has only been previously reached in the middle of the dotcom crash in 2001 and the banking crisis in 2008.
https://www.multpl.com/s-p-500-pe-ratio
Massive deficit spending will push bond prices up. Treasuries are already up to 1%. The dollar is projected to lose 5% to 10% of its value this year (ING), 20% (Citi) to as much as 35% of its value (Yale), which means foreign buyers will demand higher interest rates. Political unrest and financial profligacy have made the US less of a safe harbor, and the only way to rescue the dollar will be a rapid runup in interest rates. Equities will not be able to compete, so there goes the stock market.
Meanwhile, we have millions of people who have not worked in six months, and a hospitality industry that has permanently lost 110,000 restaurants in 2020. One third of Americans are behind on their housing payments. On the up side, the savings rate has gone through the roof, but people are sitting on the money because they are worried.
I have mentioned here several times that a crash is the way to make money, if you see it coming. Well, I see it coming. You would have to be blind not to notice that the fundamentals are seriously skewed. The Fed has increased the money supply by 24% in a single year, without a concurrent rise in production. That pretty much explains the projected 20% drop in the value of the dollar.
Now is the time to shift your money to real stuff. The export sector will make money hand over fist. Farmers will ride high, and farm land prices will rise with exports. Metals will be a decent hedge, but the big money funds are long in soybeans. Real stuff. Options are a great way to make or lose a fortune, but soybean calls have bumped 5% in the last 8 days. Traders are wondering if we will run out of soybeans, but figure extreme market highs will take care of that problem. Exports. Yummy. And that's just with a 5% drop in the dollar.
We can hold import prices down by removing import tariffs, so expect domestic inflation to remain fairly low. Falling stock prices will suck the oxygen out of the economy, and unemployment will reach painfully high levels just as the eviction moratoriums expire. The homeless rate will explode, forcing higher deficit spending.
It's been a 10 year party with hats and noise makers. The hangover and cleanup will be epic. If you think things are going to go along like they have been, good luck with that. If you dig in and do your homework, you should be able to double your assets over the next two years. America is about to have a fire sale.
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