KW: Again commentary from Jim Rickards:
The stock market has been on a tear lately, reaching new all-time highs day after day. In truth, the “highs” are only slightly higher than where the stock market was in May 2015. Most of the recent rally has just been a matter of recovering losses from the 10% mini-crashes in August 2015 and January 2016. Still, a new high is a new high. But, what’s the basis for this rally? Economic data is mixed at best with plenty of negative indicators appearing. GDP for Q2 will be released July 29. It may show growth of 2.4%, but when combined with Q1 growth of 1.1% that makes 2016 H1 growth 1.75%, which is the same weak, below-trend growth we’ve seen for the past seven years. There’s no basis to believe the economy is getting better or returning to self-sustaining trend growth except for wishful thinking. Now comes further evidence that the stock market is levitating on thin air. Corporate earnings, the true fundamental basis of stock market valuations are set for their fifth straight quarter of decline. This means stock prices are going up without higher earnings, and with P/E multiples already off the charts. That’s a recipe for a crash. The stock market is now in bubble territory, thanks to the Fed, and looks set for a precipitous fall.
There are red flags out there, if you want to look.