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Stocks vs Real economy

Friday, March 17, 2017 3:29
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(Before It's News)

Dennis Gartman Blog and News Mr. Trump’s agenda is bullish for the economy, but not necessarily bullish for stocks. That sounds illogical, but it’s not illogical at all.

Why do stocks go up before economies come out of a recession? Because at the bottoms—when the monetary authorities become expansionary—that money finds its way into the capital markets, because it isn’t needed in plants, equipment and labor.

You get that period of time that stocks take off on the upside and the economy continues to dwindle, and everybody wonders how stocks can continue to go up. That’s what happens at bottoms.

On the other hand, at the tops of economic expansions, when there’s demand for plants and equipment and labor, money has to come from somewhere―especially if the monetary authorities are starting to err on the side of being restrictive rather than expansionary, as the Fed currently is. At that point, money comes out of the capital markets and goes into plants and equipment and labor.

Trump’s proposals and his agenda are very bullish for the economy. By definition, therefore, it’s somewhat bearish for equity prices after this sort of extended rally.

- For more articles for Dennis Gartman visit http://DennisGartman.blogspot.com


Source: http://dennisgartman.blogspot.com/2017/03/stocks-vs-real-economy.html

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