The social split in the United States after a string of events, including the results of the presidential elections and the storming of the Capitol, I perceive as a vivid external manifestation of the difficulties in the economy. And against the background of these difficulties, the movement of the American stock market, and after it the stock markets of other countries, looks even more contradictory.
The obvious reason for the high cost of the market is the growth of the money supply (in parallel with it, the growth of the Fed’s balance sheet, together with the ECB and the Bank of Japan).
Too much has been said about the overheating of the American stock market in the first place and the global one as a whole, and much more will be said. At the same time, the market continues to rise.
But problematic manifestations, in addition to economic and social, can already be seen.
NASDAQ Comp Index
The first is the shrinking volatility of stock indices. Markets sometimes tend to move to an ordered directional movement, in our case up. But this movement is usually short-lived. Low volatility is followed by high volatility. Now the volatility, at least in the American stock market, is near the next lows.
Dynamics of the yield on 10-year US government bonds
Further, the sum of the growth in the yield of US Treasury bonds and the growth of the dollar. I would pay attention to the recent decline in the EUR / USD pair or to the growth of the dollar index. The need for the main funding currency arose in early January and clearly indicated itself on the charts.
While in the affected precious metals, which acted as a substitute product and sank sharply last week. I will not argue, but I suppose that this fall will not become a simple correction, but will develop. Equally, I treat the last upward movement of the dollar index and the downward movement of the EUR / USD pair as a formative reversal. If I am right, the next link in the sequence will be an increase in volatility and a decrease in quotations already on the stock markets, including the domestic one. For a banal reason, the lack of cash.
Since the end of autumn, he expressed the opinion that the period of favorable markets will last until the middle of the first quarter. So far it is. But the dynamics of US Treasures yields, currency pairs and precious metals sets it up for, possibly, a faster completion.
Chart source: profinance.ru