(National Sentinel) Economy & Markets: A pair of global banking giants is forecasting the end of the market boom, and in warning clients that an economic downturn is just over the horizon.
As reported by Bloomberg:
HSBC Holdings Plc, Citigroup Inc. and Morgan Stanley see mounting evidence that global markets are in the last stage of their rallies before a downturn in the business cycle.
Analysts at the Wall Street behemoths cite signals including the breakdown of long-standing relationships between stocks, bonds and commodities as well as investors ignoring valuation fundamentals and data. It all means stock and credit markets are at risk of a painful drop.
“Equities have become less correlated with FX, FX has become less correlated with rates, and everything has become less sensitive to oil,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, wrote in a note published Tuesday.
His bank’s model shows assets across the world are the least correlated in almost a decade, even after U.S. stocks joined high-yield credit in a selloff triggered this month by President Donald Trump’s political standoff with North Korea and racial violence in Virginia.
Just how low the market will go is anyone’s guess — and that’s what it would be, a huge guess — but meanwhile, there are other indications of an economic slowdown afoot, as Zero Hedge points out: The housing market is cooling:
It appears Institutional Risk Analyst’s Chris Whalen is spot on with his mortgage finance update: “Winter Is Here”…
The big picture on housing reflected in the mainstream media is one of caution, as illustrated in The Wall Street Journal. Borodovsky & Ramkumar ask the obvious question: Are US homes overvalued? Short answer: Yes. Send your cards and letters to Janet Yellen c/o the Federal Open Market Committee in Washington. But the operating environment in the mortgage finance sector continues to be challenging to put it mildly.
As we’ve discussed in several forums over the past few years, home valuations are one of the clearest indicators of inflation in the US economy. While members of the tenured world of economics somehow rationalize understating or ignoring the fact of double digit increases in home prices along the country’s affluent periphery, sure looks like asset price inflation to us.
In fact, since WWII home prices in the US have gone up four times the official inflation rate.
As CNBC notes further:
Houses weren’t always this expensive. In 1940, the median home value in the U.S. was just $2,938. In 1980, it was $47,200, and by 2000, it had risen to $119,600. Even adjusted for inflation, the median home price in 1940 would only have been $30,600 in 2000 dollars, according to data from the U.S. Census.
And what about all those $40,000 pick up trucks?
Translation: We’re living in a phony, contrived economy that is unsustainable. And don’t be surprised if ‘the powers that be’ conspire to crash it while Donald J. Trump is president, so he gets the blame.
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