Social Mood was delayed but not denied...
Monetary Policy Is The Decoupling of The Economy From Financial Markets. Globalization Is The Decoupling of Supply From Demand. Combined, They Led To Human History’s Largest Misallocation of Capital
Capacity Utilization with Fed Rate
Earnings yields normally rise throughout the cycle as investments come to fruition. Here we see in this cycle Corporate profits tracked global growth lower. This was all explained away, but it was really a function of 0% interest rates and a dearth of investment alternatives due to lack of demand.
The inexorable global deflationary pull of interest rates towards the zero bound, assured that the historical “rotation to cash” which occurs at the end of the cycle, would never happen. Instead, investors fled to the perceived “safety” of over-crowded high yielding assets.
U.S. Deflation (black) with global yields
Nevertheless, Central Banks facilitated excessive speculation at the end of the risk cycle.
Here we see that the cyclically played out IPO market exhibits an additional late stage rally that was not evident at the end of the 2008 cycle, due to post-Brexit stimulus:
Likewise the Canadian market rallied into a GDP decline: