For this year, my guess is that the markets will be goosed to achieve the return expected by pension funds, which is around 7-7.5% for their portfolios. I hear that 2 of the bigger ones are on target for just that.
For many years , if was understood that equity markets were a form of gambling. Yes, there were some who bought essentially for posterity, with an eye to dividends for themselves and their heirs—and the only way they avoided the speculative gamble was to not ever sell, to not ever be interested in price changes. It was kind of like a perpetual bond.
This mentality was tested during times of high rates, when a more certain bank account would yield the same, or better. People not totally committed to never selling would sell at these points and put the money in the bank, and leave the markets to the gamblers.
With public involvement and coerced private involvement in the equity markets came a new impression of equity markets as more stable and more certain, especially over longer time-periods. Policy supports this impression, as well as the corresponding reality that makes it easier to sell the markets. The market sensibility has gone from “you put into markets only that money you can afford to lose” to “you put into markets that money that you cannot afford to lose”.
All manner of new realities flows from this seismic shift. While it is true that a “crash” might happen, IMO it will not be manifest in prices, but in the currency in which thise prices are denominated—indeed, some argue that this crash is underway right now, with QE as a leading indicator and the USD as a trailing one. Control systems are not yet so universal so as to be able to, through command, destroy the “law” of supply and demand as relates to a currency.
This level of control is not only sought, but is also being worked on at this very moment, notably by the IMF and the US, each in its own way. As long as there are competitors in this effort, currencies will compete, and there will be some sort of market forces at work, although decreasing ones, to be sure.
The instant there is no competition among those with a real shot, we will be in a dictatorship of value and concomitant pricing. This dictatorship of value will start by dictating the value represented by financial assets, but will no doubt creep into every other area of life where value is assessed, right down to the level of the worth of the individual, as in serious communisms like the USSR and China.
Over time, as happened in the USSR and as is happening in China, the size of the management unit for this system of control will exceed the reach of the control mechanisms available, and there will be another dissolution and subsequent reorganization. History is replete with examples of this sort of “ratcheting mechanism”.
So here we are, with a mediocre real economy, with deepening wealth divide, with the most basic (and critical) needs being met in industrialized societies, with the USD and EUR still strong in the face of some will to drive them down, with the limits of both Chinese and American control being seriously tested, with the first top-level acknowledgements that the debt will never be “paid back”, with the advent of blockchain as the first potentially workable mechanism supporting a global currency, with governments all-in in the markets while watching Japan spearhead the effort, with economic and monetary numbers openly manipulated, and with global population growth rates possibly slowing.
There is not even much attempt to hide current realities anymore. Stat manipulation is public. The impossibility of debt repayment is public. The desire to drive down the dollar is public. Desire to control currency in the face of blockchain is public. Asset price support is public. NIRP is public. Etc. It is all out there in the open, Powell’s plaintive bleat of “not QE” having the effect of only comic relief.
The US election will be a big deal. Drumpf is no visionary, he is a simple and venal adolescent. If he gets in again, it will be 4 more years of the same, imo. If the Democraps get in, there will likely be serious cooperation internationally to implement a global currency and payment system. And if they don’t win in 2020, imo there is a good shot that they will win in 2024.
At that point, the only ones who will prosper will be members of the party, and the openly criminal—often one and the same. It will take a while, and in the meantime there will be fragmentation, attempted movement of capital, a return to real assets and a flight by some to perceived literal safe harbors, etc. We have already seen the beginnings of this movement by those who can afford to plan and prepare early.
Like timing the markets, timing this huge social cycle will be critical. Gain can be maximized if you wait as long as possible to implement, but if you get too greedy you might wait too long and your chance will evaporate. I personally am getting ready, but would appreciate greatly another 4 years of Drumpf to aid in my efforts. Another short-lived drawdown would be welcome. Meantime it is getting real assets in order in different jurisdictions, getting appropriate currency exposure diversification, getting passports to enable easier function in a multiplicity of areas, etc.
In the short term, the markets will continue to rise, and the USD will be relatively stable.
Step back and take a look at the landscape, and make your assessment of who will do best, who would be a worthwhile ally.