The waning days of the Obama administration have set us up perfectly for higher interest rates, a major recession and a giant stock market crash. It is time to batten down the hatches and to prepare for very rough seas ahead.
The comments above and below are excerpts from an article by Michael Snyder (TheEconomicCollapseBlog.com) which has been edited ([ ]) and abridged (…) by munKNEE.com (Your Key to Making Money!) to provide a faster & easier read.
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Since Donald Trump’s victory on election night we have seen the worst bond crash in 15 years…trillions of dollars of wealth wiped out…and analysts are warning of another tough week ahead. The general consensus in the investing community is that a Trump administration will mean much higher inflation, and as a result investors are already starting to demand higher interest rates…
For those that are not familiar with the bond market,
- when yields go up bond prices go down and,
- when bond prices go down, that is bad news for economic growth, so we generally don’t want yields to go up. Unfortunately, [however,] yields have been absolutely soaring over the past couple of weeks, and the yield on 10 year Treasury notes has now jumped “one full percentage point since July”…
… So many things in our financial system are tied to yields on U.S. Treasury notes…
- the average rate on 30 year mortgages is shooting into the stratosphere… [and,] if mortgage rates continue to shoot higher, there will be another housing crash.
- Rates on auto loans, credit cards and student loans will also be affected.
- Throughout our economic system it will become much more costly to borrow money, and that will inevitably slow the overall economy down.
Why bond investors are so on edge these days is because of statements such as this one from Steve Bannon [as noted by the Hollywood Reporter:] “In a nascent administration that seems, at best, random in its beliefs, Bannon can seem to be not just a focused voice, but almost a messianic one [saying]:
“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement. It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”
Steve Bannon is going to be one of the most influential voices in the new Trump administration, and he is absolutely determined to get this “trillion dollar infrastructure plan” through Congress. That is going to mean a lot more borrowing and a lot more spending for a government that is already on pace to add 2.4 trillion dollars to the national debt this fiscal year.
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Sadly, the above comes at a time when the U.S. economy is already starting to show significant signs of slowing down.
- It is being projected that we will see a 6th straight decline in year-over-year earnings for the S&P 500, and
- industrial production has now contracted for 14 months in a row.
The truth is that the economy has been barely treading water for quite some time now, and it isn’t going to take much to push us over the edge…Yes, the stock market soared immediately following Trump’s election, but it wasn’t because economic conditions actually improved.
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If you look at history, a stock market crash almost always follows a major bond crash so, if bond prices keep declining rapidly, that is going to be a very ominous sign for stock traders – and history has also shown us that no bull market can survive a major recession. If the economy suffers a major downturn early in the Trump administration, it is inevitable that stock prices will follow…
A shaking has already begun in the financial world, and this shaking could easily become an avalanche.
- Now is not a time to party.
- Rather, it is time to batten down the hatches and to prepare for very rough seas ahead.
- All of the things that so many experts warned were coming may have been delayed slightly, but without a doubt they are still on the way, so
- get prepared while you still can, because time is running out.
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