Gualfin, Argentina – As expected, Wall Street’s shills were out in force yesterday.
And the Dow rebounded from Tuesday’s rout – up 293 points.
CNBC assured investors that the “U.S. is a place you should be investing.”
And Bloomberg explained that, “based on history,” investors could expect to wait no more than four months until the stock market fully recovers.
The S&P 500 rally that began in March 2009 has been marked by two previous corrections: a 16% selloff from April to July in 2010, and a 19% slump over seven months a year later. The benchmark recovered within about four months of each.
So if history is any guide, the market may not be back at its May peak until late December.
Bull or Bear?
But wait… This assumes we’re still in a bull market.
As we’ve seen, two factors have been paramount in driving the bull market of the last six years: the Fed’s zero-interest-rate policy (ZIRP) and its QE programs.
And neither of those things is working for the U.S. now.
The Fed’s QE is on pause. As for ZIRP, it seems to have lost some of its zest.
It’s no wonder… As we’ve pointed out many times, lending money that didn’t exist before to people who are already deeply in debt is not a good business model. It doesn’t stimulate an economy. And it doesn’t make people better off.
All it does is keep the can bouncing down the road.
And with the Fed now running out of ammo, we MAY no longer be in a bull market. Instead, we MAY be entering a bear market.
If so, you can forget about a recovery in four months. Instead, it may take four years… or 40 years… to reclaim the bull market high set this past May.
Remember, from the bull market high set in 1929, it took until 1954 before the U.S. stock market fully recovered. A quarter of a century, and one world war, later.
And in Japan, the Nikkei is still roughly 50% below its bull market high set in 1989.
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