The chart above shows some of the recent drivers of our very unstable markets.
I call it a tug-o-war between the free markets and the central banks. The markets drop sharply and the central banks (Federal Reserve) flood the markets with liquidity (money printed out of thin air) and the markets surge back on the cocaine rush. But it never lasts long before larger problems develop.
Are we close to the next crash? That is the key question I focus on. But we now have to ask when will the central banks step back in and how far will they go.
For those who have followed me for some time, you know I think the market is exceeding overpriced. You are paying $3 for every $1 of SP500 revenue today. The historical price would be just under $1 for every $1 of revenue (70% lower).
It does not have to reset to the historical average for another large round of losses to hit your retirement funds. This is why determining the difference between normal pullbacks and larger corrections and bear markets is critical.
Instability works in two directions. Lately it has been up. Don’t stick around long when it reverses again. Please.
If you are new to investing and my analysis, please start with my free guide on the TSP funds. I try to cover what is not mentioned anywhere else I found on the internet including the official TSP website.