3 – In the bigger picture bull markets don’t die of old age or because of excessive valuations, the later generally just leads to a correction. The two most common catalysts which herald the arrival of a bear market are inflation or deflation and with the central banks printing money like never before we believe its inflation and subsequently higher interest rate that will end this particular post GFC bull market. Both central banks and governments don’t appear prepared to see their economies endure prolonged tough times on their watch hence its full steam ahead on the stimulus front which will end in one of 2 ways either we get inflation and higher interest rates or the market will lose faith that the establishment can stave off a deep recession / depression – both are bad news for stocks.
The elevated volatility MM expects this year will probably unfold as investors swing between differing views around stimulus, economic recovery, inflation and bond yields – no easy equation mix.
