It is always important for us within the aviation industry to understand what’s going on in the equity markets as well as the overall economy. The Trends Research Institute through their Trends Journal is a world leader in forecasting. Therefore we are pleased to provide this weekly market and economic update to our readers.
-On Aviation™
As we have long noted, by the facts, Wall Street and Main Street are worlds apart and have no interrelationship.
On the market front, again, as we have continually detailed, the one percent own some 54 percent of all the equities and when you add up the top 10 percent in total, they own 90 percent of the stocks. It is clear proof of who runs and who ruined what was once called “The Land of Opportunity.”
The only opportunity left is for the hedge funds, private equity groups and venture capitalists to buy up, own and dominate every sector of the economy—from railroads to airlines, from media to medicine, from healthcare to hotels, from farms to food chains, from restaurants to retail, from manufacturing to movies—across the business spectrum they own America.
On the stock market front, the game is rigged for all to see. But being that the vast majority of Americans are deaf, dumb and blind to hard facts and indisputable data and only swallow the crap being fed to them by politicians and Presstitutes—the media whores who get paid to put out for their corporate pimps and government whore masters—they don’t have a clue.
Unquestionably, equities and the economy spiked because of the countless trillions—between $6 to $8 trillion—Washington pumped into the system to fight the COVID War… that imbeciles call “The Pandemic.”
Yes, that’s what the politicians and media blame for the 50 percent office occupancy rate and countless millions of lives and livelihoods that were destroyed by the “The Pandemic”!
Ask yourself and ask others: “How many people do you personally know, friends and family, who died from the coronavirus?”
Do you know someone who died, how old were they and how many preexisting comorbidities were they suffering from?
Can you count them on one finger?
Equities also spiked because of the zero-interest rate policy that allowed the money junkies to get their monetary methadone for next to nothing so they could play the markets and buy up more businesses.
On the buying up businesses front, we reported that merger and acquisition rates were the biggest on record in 2021. And while global buyout deals have gone down 35 percent last year from the 2021 highs, according to Bain & Co., in 2022, buyouts were still the highest since 2007… just before the Panic of ’08.
And as for the equity market scam read all about it:
Buybacks Set Pace for Record
Repurchases among S&P 500 companies are projected to top $1 trillion for first time
U.S. stocks have received support from a key source during 2023’s shaky market environment: companies repurchasing their own shares.
Stock buybacks by companies in the S&P 500 are projected to top $1 trillion in 2023 for the first time in a calendar year, according to S&P Dow Jones Indices. Authorizations for repurchases are picking up pace: As of Feb. 17, they totaled more than $220 billion, a record for that point in the year, according to a Goldman Sachs analysis of S&P 500 and Russell 3000 companies. (The Wall Street Journal, 28 February 2023)
So here’s the deal, the Dow is down 4 percent for the month and down year to date because the money junkies fear that the Fed will keep raising interest rates and it will cost too much to get their heavy fixes of monetary methadone that allow them to gamble in the markets and keep buying up whatever businesses they want wherever they want.
Therefore, to keep the game going, when a company buys back its stock, the increased demand pushes prices higher. It’s a supply-and-demand scam. The less supply the higher the price. Back in 2017, when then-President Donald Trump pushed through his tax breaks for the Bigs, we reported that “Since the Panic of ’08, U.S. companies have bought back some $5 trillion of their own stock. Without the stock buybacks, stock values would have been negative from then to now.”
And according to The Wall Street Journal, “Mega-cap technology companies were among those spending the most on buybacks in the last three months of 2022. Apple Inc. spent about $19.5 billion on stock repurchases, Meta Platforms bought back about $6.9 billion of its shares, and Microsoft Corp. repurchased about $5.5 billion of its stock.”
The Street is estimating buybacks will be over $1 trillion this year.
WSJ also noted that in his State of the Union address this month, President Biden took a shot at big oil companies that used record profits to buy back stock while proposing quadrupling of the current 1 percent federal tax on buybacks.
TREND FORECAST: As we noted in “Corporations To Return to Buying Their Own Stock” (18 May 2021), the Bigs getting bigger trend will continue to persist.
Rather than re-investing to build their business and for capital improvements in research, development, new equipment, new products, and in paying their workers enough to keep up with inflation… when corporations buy back their own stock, the benefits flow to shareholders, market gamblers, and the executive suite. Again, it’s about supply and demand—the more stocks they buy, the less supply. The less supply, the higher the price goes.
The Bottom Line
Where the equity markets and the economy are headed is simply based on where interest rates are heading. The higher and faster interest rates rise, the faster and deeper stocks and the GDP will fall.
Hitting the highest rate since 1999, when they launched the euro, consumer prices in France rose 7.2 percent in February and in Spain they were up 6.1 percent compared to the 5.9 percent jump in January.
As we have reported, the higher interest rates rise, the more governments’, businesses, and private sector borrowing costs go up. Thus, a bad situation will be made much worse.
After denying that inflation was spiking—and making fun of those of us who said it was going to hit multi-year high—the European Central Bank is now bragging that they will raise interest rates (which were minus 0.5 just seven months ago) another 50 basis points when they meet on 16 March.
Bringing the benchmark rate to 3 percent, considering the inflation rate across Europe, the bank rate is still deeply in negative territory.
To illustrate the facts that as interest rates rise, economies go down, in the EU, with real interest rates deep in negative territory, Germany, Europe’s economic powerhouse, saw its economy shrink 0.4 percent in the fourth quarter.
Making a bad situation worse, considering the real inflation rates, the economies are not going into recession, they are diving into Dragflation: Declining economic growth and rising inflation… as the data proves but the mainstream business media denies.
Need more proof? Today it was reported by market researcher Kantar that grocery prices in the U.K. hit a new record in February, spiking 17.1 percent.
YESTERDAY: DOW INCREASES SLIGHTLY AFTER BRUISING WEEK
The Dow Jones Industrial Average increased 72.17 points, or 0.2 percent, yesterday to end the day at 32,889.09. The benchmark S&P 500 also gained 12.20 points, or 0.3 percent, to close at 3,982.24. The tech-heavy Nasdaq increased 72.04 points, or 0.6 percent, to 11,466.98.
Stocks were up slightly after coming off the worst-performing week of the year, with the Dow falling 3 percent. The yield on the benchmark 10-year U.S. Treasury note moved down to 3.93 percent. The yield on the 2-year note traded at 4.791 percent after settling last week at 4.803 percent, which The Wall Street Journal noted was its highest level since July 2007.
The yields are the highest they’ve been in 15 years, and some wealth managers are putting their clients’ money into these securities.
Elsewhere, London’s FTSE was up 56.45, or 0.72 percent, to 7,935.11 and the STOXX 600 gained 4.88, or 1.07 percent, to 462.58. In Asia, the Nikkei was down 29.52, or 0.11 percent, to 27,423.96, and South Korea’s Kospi was down 20.97, or 0.87 percent, to 2,402.64. Hong Kong’s Hang Seng was down 66.53, or 0.33 percent, to 19,943.51. Chinese stocks also closed lower. The Shanghai Composite was down 9.13, or 0.28 percent, to 3,258.03 and the Shenzhen Component was down 85.51, or 0.73 percent, to 11,701.95.
TREND FORECAST: The same Central Banksters who called inflation “transitory” for months are the ones tasked with getting a grip on the persistently high inflation levels and it seems increasingly improbable that the bank will ease its rate hikes this year. There is even new concern that these hikes will be 50 basis points.
The central bank continues to say it wants to bring inflation down to 2 percent, with expectations for the federal-funds rate to be 5 percent to 5.25 percent by the end of the year. However, with Dragflation—declining economic growth and rising inflation—the only way inflation will hit 2 percent is if, and/or when, the global economy crashes. And as we note, should the Middle East and Ukraine wars heat up the global economy will crash as WWIII escalates.
OIL: Brent crude futures fell 83 cents yesterday, or 1 percent, to settle at $82.33 a barrel, and the U.S. West Texas Intermediate also fell 61 cents, or 0.8 percent, to $75.71.
Oil prices were impacted by concerns that the U.S. Federal Reserve would continue to raise rates to bring down inflation, which could prompt a recession. The U.S. Dollar also hovered around a seven-week high.
We maintain our forecast that oil prices will rise as China’s economy re-heats and war tensions keep prices higher. $90-$100 per barrel range in the second half of this year, OilPrice.com reported.
TRENDPOST: This week’s issue goes into great detail about the instability in the Middle East and how Israel is inching toward all-out war with Iran over its nuclear program. Oil remains our wildcard. Should prices break above $130 per barrel, it will crash equities and economies across the globe.
GOLD: Gold for April delivery rose $7.80, or 0.4 percent, to close the day at $1,824.90 an ounce. The precious metal lost 1.8 percent last week, which marked the lowest price this year. Gold is down 6 percent in February.
We have long noted that gold is the world’s safe-haven asset during unstable times. But prices can be impacted by high Treasury yields because gold is a non-yielding asset.
BITCOIN: The world’s most popular crypto was down yesterday amid new concerns that the Federal Reserve will continue to raise interest rates and drive up Treasury yields, which makes bitcoin a less attractive investment because, like gold, it is a non-yielding asset.
The crypto approached $24,000 a coin, but pulled back to a low of $23,400.
There was early optimism in the crypto market this year, but recent CPI and PPI data hurt some expectations that inflation was fading.
TREND FORECAST: For several weeks we had forecast that if bitcoin strongly breaks above $25,000 per coin it will continue to steadily rise.
LAST WEEK: STRONG ECONOMIC DATA SOURS MARKETS
Rising inflation and an unexpectedly strong rise in consumer spending gave equity markets their worst week of the year last week as investors saw a greater chance that the U.S. Federal Reserve will raise its key interest rate by at least a quarter point next month… and possibly 50 basis points.
January’s Core Personal Consumption Expenditures Index, the Fed’s preferred gauge of inflation, shot up 4.7 percent last month, year on year, with energy and food costs excluded.
Analysts’ consensus foresaw a 4.4-percent bump.
Also last month, American consumers spent 1.1 percent more, adjusted for inflation, than in December, the U.S. Commerce Department said.
Until recently, markets had been expecting a pause in the central bank’s rate hikes this year and perhaps even one or two rate cuts.
“My view of the economy hasn’t changed that much,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in a 24 February Wall Street Journal interview.
“We have inflation pressures that are pretty ‘in there’,” she noted.
Mester supported a half-point rate increase at the Fed’s most recent meeting, twice the increase the rate-setting committee adopted.
Philip Jefferson, a member of the Fed’s board of governors, said the strong labor market and resilient consumer spending indicated the fight against inflation will last longer than hoped.
“The ongoing imbalance between supply and demand for labor, combined with the large share of labor costs in the service sector, suggests that high inflation may come down only slowly,” he said at a New York conference earlier this month.
For the week, the Dow Jones Industrial Average dropped 2.6 percent, the NASDAQ shed 3.3 percent, and the Standard & Poor’s 500 index sank by 2.7 percent.
The yield on the two-year treasury note, which tends to closely mirror investors’ short-term expectations, leaped to its highest Friday since 2007, reaching 4.803 percent amid a sharp bond selloff.
The benchmark 10-year treasury note rose to 3.948 percent Friday from 3.879 percent Thursday.
Yields rise as prices for treasury securities fall.
Spot gold ended last week down 1.8 percent at $1,811.12 at 5 p.m. U.S. EST on 24 February.
The price of Brent crude oil for March delivery gained 1.2 percent to $83.16, breaking its longest losing streak this year. U.S. benchmark West Texas Intermediate ended the week virtually flat at $76.45.
Bitcoin slid 7.3 percent to $23,003.60 at 5 p.m. U.S. EST on 24 February.
Abroad, London’s FTSE gave up 1.6 percent. The trans-European Stoxx index dropped 1.6 percent.
The Japanese Nikkei 225 was off less than 0.1 percent, while South Korea’s KOSPI fell 1.2 percent.
In China, Hong Kong’s Hang Seng sank 3.3 percent, the mainland’s CSI Composite edged up 0.6 percent, and the tech-heavy SSE Composite was up 1.2 percent.
TODAY: DOW LOSES MORE THAN 230 POINTS TO CAP OFF A DOWN MONTH
The Dow Jones Industrial Average was down 232.39 today, or 0.71 percent, to 32,656.70 and the S&P 500 was down 12.09, or 0.30 percent, to 3,970.15. The Nasdaq also shed 11.44 points, or 0.10 percent, to close the day at 11,455.54.
The Dow was down about 4.2 percent on the month and the S&P lost about 3.6 percent.
There is a looming feeling on The Street that the Federal Reserve will continue to increase interest rates to tame inflation, which will lead to a recession.
TREND FORECAST: With all indexes posting their second negative month in the past three, we warn Trends Journal subscribers that should equities continue their slump, a March crash at the scale of the 2000 dot-com bust will be on the near horizon. Indeed, The Trends Journal had forecast the dot.com bust in our October 1999 issue when it was a quarterly newsletter. Again, the bottom line is interest rates. The higher and faster the central banks raise them, the deeper and quicker equities and economies will fall.
The 10-year U.S. Treasury yield was off today and closed at 3.914 percent, while the two-year yield was at 4.795 percent. The Wall Street Journal noted that both yields recorded their largest one-month percentage-point gains since September. At about the time of the COVID-19 outbreak, 10-year Treasury yields were about 0.5 percent.
Elsewhere, London’s FTSE was down 58.83, or 0.74 percent, to 7,876.28, and the STOXX600 was down 1.47, or 0.32, to 461.11. In Asia, the Nikkei was up 21.60, or 0.08 percent, to 27,445.56, and South Korea’s Kospi gained 10.21, or 0.42 percent, to 2,412.85. Hong Kong’s Hang Seng was down 157.57, or 0.79 percent, to 19,785.94. In China, the Shanghai Composite was up 21.57, or 0.66 percent, to 3,279.61, and the Shenzhen Component gained 81.85, or 0.70 percent, to 11,783.80.
The Hang Seng was down after Hong Kong announced that it will no longer enforce its COVID-19 mask mandate.
TRENDPOST: Gerald Celente said the mainstream Presstitutes in the media repeated the Fed’s BS line that inflation was “transitory” and not a problem, while The Trends Journal warned for months of the dangers.
Again, we have warned that if the Fed raises interest rates 50-basis points in March, the economy and equities will tank.
OIL: Brent crude was up $1.42 per barrel today, or 1.72 percent, to $83.87 and West Texas Intermediate also gained $1.18, or 1.56 percent, to $76.87.
TREND FORECAST: We forecast that oil prices will climb as China and Asia recoup and regenerate their economies as they officially end the COVID War. Also, tensions in the Middle East and the Ukraine are also factors for higher oil prices.
However, oil prices will remain in their current range should the U.S. and Europe central banks aggressively raise interest rates. The higher interest rates rise, the deeper economies will fall, thus less demand for oil = lower prices.
GOLD: The precious metal saw gains today as market fears grew that a recession is looming. Gold was up $9.30 an ounce as of 4:36 p.m. ET, or 0.52 percent, to $1,834.30.
The yellow metal recovered some of its losses from February, its worst month since June 2021. Investors have expressed concern that the Federal Reserve will continue to hike interest rates and the risk that the U.S. dollar will remain strong compared to other world currencies.
Reuters noted that the greenback was on pace for its first monthly gain in the past five months. Daniel Pavilonis, senior market strategist at RJO Futures, told the wire service that gold prices will likely continue to see gains in the next few weeks as the dollar and Treasury yields weaken, but he expects the price to fall again—towards the $1,700 price range when the Fed announces its next rate hike.
TRENDPOST: Pavilonis appears to agree with our forecast that gold prices are cheap and have a lot of room to grow due to global instability. He said potential gold buyers could buy the asset amid recent lows and hold.
Celente noted that gold prices are down and they should be “much higher,” especially considering the risk of Dragflation: declining economic growth and rising inflation.
“When the economy goes sharply down, gold’s going to go up,” Celente said. “At some point the Fed will lower interest rates. The lower interest rates fall, the steeper the dollar will decline and the higher gold prices will rise… so we’re bullish on gold.”
BITCOIN: The world’s most popular crypto was down $31.20 as of 1:20 p.m. ET today, or 0.13 percent to $23,457.
Material Indicators, a bitcoin monitoring resource, tweeted, “Would like to see more Bitcoin bid liquidity enter the active trading range to increase the chances of closing the Monthly candle above the 50-Month Moving Average.”
“Close above the 50-Month MA = Bullish Close below $23,128 = Red and an invitation to retest key support levels,” the post read.
TRENDPOST: Bitcoin has fallen about 6 percent in the past week. The main concern among investors is that the Federal Reserve will act bolder to bring down inflation, and, as we have long noted, these hikes encourage foreign investors to look at the U.S. dollar and Treasuries.
Again, we stand by our forecast that bitcoin must break strongly above $25,000 per coin for it to move significantly higher. And, it has held very stable in the current low $20K range for the past several months.
Note: The views expressed on on-aviation.com are not necessarily those of On Aviation™.