Why This Bull Market Is All Bull

Get your peepers around these numbers…

In the past month Tesla has gone from $125 to $225, an increase of 70%.

Meanwhile, the kings of Artificial Intelligence – Nvidia and C3 – are up 380% and 460% respectively, this year.

Their run has been so impressive it’s made the darlings of the tech sector – Apple, Google, Amazon and Microsoft – look like a bunch of digital sloths. They’re only up 56 – 80% this year.

Not surprisingly, everyone wants to know if this will last.

Absolutely not!

It’s like running up a hill. What’s more sustainable, a steep climb or a gradual climb? It’s physics 1.01.

So what’s driving this market?

You wouldn’t know it but we’re in the middle of a bear (downward) market that started almost eighteen months ago. However, not all markets head up or down in one straight line.

This so-called bull market is nothing more than a ‘bear market rally’. i.e. it’s an upward rally within a much longer downward trend.

The trap with bear market rally’s is they’re extremely powerful giving the impression we’re in a new bull market. We’re not. But so many people get sucked in by them.

Bear market rally’s are like an estranged couple who come back together after a separation.

For the first few weeks/months there’s an explosion of energy and both sides are convinced, “this time it’s different, we’ve turned the corner” 

But eventually the energy fades (market top) and both realise nothing has changed and the relationship spirals downward again (market correction).

Every stock market worldwide is now in over-bought territory, all within 10% of their record highs of 2021…the most expensive market in history.

The only difference is each developed economy has had at least ten rate hikes since the manic highs two years ago.

And unfortunately things may get a little tougher here in Oz.

This week our unemployment levels hit a record low and immediately Treasurer Chalmers assumed front and centre stage for the achievement. And good on him, it’s his job.

But record low unemployment is the last thing we need with red hot inflation which is why you can expect the RBA cash rate to be within a whisper of 5% by Christmas.

So if Dr Chalmers wants to take credit for the record low unemployment, he must also take some responsibility for the next few rate hikes.

You can’t take the bouquets without the brickbats.

Consequently the bond market is now screaming recession which doesn’t bode well for the markets, including property.

And that’s why I would ignore this bull market.

It’s all bull.

Have a great weekend!

Adam

Back paddock – if it doesn’t challenge you, it doesn’t change you. (Some bloke’s shirt)

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