This is the last of a series of free Wall Street Examiner Pro Trader reports that I have been posting as I recover from my emergency open heart surgery on May 3. Next week I will return to regular publication of these reports for subscribers only.
This report covers US and European central banks and banking indicator trends and what they tell us about the outlook for the US stock and bond markets. Download the complete report in pdf format here.
If you are a subscriber, these free reports are not charged to your subscriptions. I have now credited your account for the one month of downtime since these reports were regularly posted. This applies to all Pro Trader services.
I thank each one of you for your patience and support! Thanks to the many of you who have written to me directly offering your encouragement! I truly appreciate hearing from you. Fortunately, my recovery has been going very well.
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Virtually nothing has changed since the last update, other than an uptick in current US GDP for the second quarter. When economic data releases begin to reflect this next month, the market reaction should be negative as traders conclude, correctly, that the Fed will tighten. Markets top out when the news is good, because that is, in fact, when the Fed turns the screws.
Trends in the Fed balance sheet, in US commercial banking data, and in European banking data remain in place. The US banking system and systemic liquidity continue to expand as capital flows out of Europe, fleeing NIRP. Regardless of which central bank prints the money, capital will seek the highest returns relative to risk. With negative interest rates and negative sovereign yields in Europe, the US remains a magnet for funds fleeing the punitive policies in Europe. The flow of this flight capital into the US continues to buoy US stock and bond prices.
When that will end depends on both central bank policies and the faith and confidence of market participants in those policies. While we can track bank data for any sign of change in deposit growth or loan growth, the first signs are likely to show up in the technical analysis of the markets themselves, which you can follow in the Pro Trader market updates.