The single biggest story this morning is Treasury Secretary Steve Mnuchin pouring ice-cold water on the market’s mania.
Since Trump was elected November 8th 2016, the market has gone almost straight up on the notion that an economic utopia has arrived and that GDP growth of 5% (yes, CNBC ran numerous stories on this) was just around the corner.
The mania has been incredible. The last time the market had a 1% down day was OCTOBER 11! From a daily RSI reading the S&P 500 is more overbought today than at any point since the 2009 bottom.
But not for much longer.
Treasury Secretary Steve Mnuchin appeared on numerous media outlets this morning. And NOTHING he had to say supported stocks’ current lofty levels.
First and foremost, Mnunchin stated point blank that the Trump administration HOPES to implement tax reform by August.
Not two weeks from now. Not even two months from now. But AUGUST.
And that is their hope, not a hard deadline.
Then Mnunchin announced that there was “not much administration can do to affect growth in short term”.
For weeks we’ve been told by the financial media that 5% GDP growth is just around the corner… that the US has already entered an economic utopia… and that stocks are correct to be rallying to all –time highs based on this belief.
Consider the following headlines:
· Americans brimming with optimism on the economy (The Hill)
· Investors’ Economic Optimism Surges to Level Not Seen Since 2011 (Bloomberg)
· US stocks are at all-time highs (Business Insider)
And then, this morning, Trump’s #1 econ guy stated POINT BLANK that the administration cannot juice growth in the short-term. He also stated that GDP growth of 3% or 4% is “achievable” but it will take “two years.”
And stocks are the most overbought in EIGHT YEARS on expectations of GDP growth of 5% occurring RIGHT NOW?!!
This is the sort environment in which Crashes can happen.
And while the odds are low that we get an actual Crash… this environment is more conducive to Black Swan events than any other in the last seven years.
On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.
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Chief Market Strategist
Phoenix Capital Research