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  • Christian Armbruester

Tinker, Taylor, Bail-Out

The irrational exuberance in the Nasdaq is back to levels we last saw just before the dot com crash, and by any measure “cheap” is not a word you would use to describe Nvidia. Market breadth in global stocks is the narrowest since 2003 and US treasuries have fallen three years in a row for the first time since 1787. The leading economic indicators are screaming recession, global debt is at a record high at $225 trillion, which is twenty times larger than it was in 1997, and will need to be refinanced at rates that are anything other than zero.

Meanwhile, the consumer is tapped out with the excess savings from being locked in our homes for more than a year all but gone, Europe is utterly (insert your favourite expletive here please), and China is imploding. If that all sounds bullish, then it may very well be possible that something a bit stronger has been added when drinking the Kool Aid. Fact is, the S&P500 is up from when the Fed embarked on the most aggressive tightening exercise in history, and the VIX, as that most wonderful measure of market risk, is at the lowest levels since before Covid began.

Before we utter those magical words, and this time is different, what could possibly explain the current market constellation? We have talked about AI, but that just seems pure speculation and there have been no changes in the valuation of stocks that will benefit in the long run. Maybe there will be peace on earth, but that is just wishful thinking. No, very clearly, the reason that markets are defying gravity, is because if Taylor Swift were an economy, she'd be bigger than 50 countries.


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