Things have been looking good for a while from a financial perspective in America and around the world. Every major indicator (other than inflation) is pointing to continued prosperity. There’s a problem. Indefinite prosperity, particularly in asset pricing, is impossible. There’s always a cap, then a fall, then a rebound. It’s an unavoidable ebb and flow. The question JP Morgan’s Jan Loeys asks is when the rubber band will snap back.
“The speed of these upgrades and asset price rallies is both exhilarating and scary. The faster we rally, the greater the joy, but the more one should be worried about the eventual reckoning. How far from now is that and what should we do about it?”
Source: Zero Hedge
In Bizarre Warning JPMorgan Says “Beware The Shadow World” As “Speed Of Asset Rally Is Scary” | Zero Hedge
While the Fed may still be confused by the lack of inflation, if only in the “real economy”, if not in financial assets, increasingly more analysts have realized that what the Fed has done is tantamount to blowing an roaring inflationary bubble, if largely confined to the realm of asset prices. And while we used a Goldman chart to demonstrate this divergence a little over a month ago…
In a note from JPM’s Jan Loeys, titled “Financial overheating a problem yet?”, the strategist writes that “growth-sensitive assets, such as equities, credit, cyclicals, and commodities continue to gain and outperform, keeping us comfortably in the Growth Trade. Growth prospects have been rising and accelerating over the past two months from the only slow and dispersed upgrades of the previous 12 months. By now, we are in a full-fledged and globally synchronized move up in growth optimism.” Perhaps, but there is a catch as JPM unwillingly concedes: