2015 will actually be the first year since 2007 without some form of quantitative easing!
During this six year period the Fed’s Balance Sheet has exploded by over $4 trillion and the US Government has spent another $11+ trillion.
Between October and November of last year, the Federal Government issued $1 trillion in new debt in one month.
The bond bubble was $80 trillion going into 2008. Today it’s over $100 trillion. The US had $5 trillion in public debt going into 2008.
Today it has over $18 trillion.
Despite all of this the US has experienced the weakest recovery in 80+ years! That is assuming it’s really a recovery? Every other recession going back to 1954 saw rates begin to rise a few years into the recovery.
It makes me pause and think that a year without monetizing bonds is going to be a big shock to the financial markets and stock traders.
As we have spelled out in previous reports we are seeing global weakness around the world with very worrying signs coming from China and Emerging Markets. The US has been held up as the strongest economy with which to pin optimistic hopes.
However, US Macro Surprises have suddenly become alarmingly negative (see bottom below) and are clearly following forward earnings estimates lower (above).
Extract from one of my favorite macro economic analysts, Gordon T Long.
Have you reviewed your strategy with a financial advisor ?