The tax cut sugar high is wearing off, one year later. U.S. gamblers are betting they can avoid the tax-cut imploded fate of Emerging Markets, by taking maximum risk in the face of maximum risk. In other words, they've been convinced that they are "decoupled". From reality...
One year ago Steve Mnuchin kicked off the tax cut party with this announcement on CNBS:
That announcement was code word for Wall Street to front-run the tax cut. In the event every risk asset on the planet caught a massive bid - Cryptos, Condos, Cannabis, China Tech, Mega Cap Tech stocks, FinTech, AI stocks, Semiconductors, Biotech stocks, IPOs etc. etc...
Everything has rolled over except Amazon and Apple. What was once "FAAMG" is now an AA meeting.
This is the past year in the S&P 500:
The ramp began one year ago in September, followed by a lull in the late Fall. Then a melt-up into late January. Then a crash. The crash was when the rest of the world and all other risk assets left the party. Since April, U.S. stocks have been levitating on their own, in a manner very similar to the first leg - a ramp, a lull, and then the most recent melt-up deja vu of January.
Of course this time there are obvious breadth divergences, rest of the world divergences, and divergences against every other risk asset class. When I say obvious, I mean obvious to anyone who can fog a mirror and isn't otherwise taking advice from serial psychopaths...
It's been a year of non-stop short-covering, under the auspice of a "retail recovery"
Good Times.
Outside of the tax-cut induced sugar high, here we see what is really going on in the global 'Conomy:
An optimist would say this period is 2011. A pessimist would say this is 2008. A realist knows that it's neither - it's 2018, which will end far worse than either of those last two downturns:
Far from Donny's Jedi Mind Trick for weak-minded fools, the EM crisis is back, and this time it's serious. Because higher interest rates, record debt, and declining currencies are a toxic combination:
"It looks like the emerging market bubble is about to burst."
"Party on, Garth"
"Party on, Wayne"
It appears that Emerging Markets and U.S. gamblers took home totally different messages from the Turkish implosion, and from Jackson Hole:
