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Monday, December 13, 2021

The US is at a crossroad now and it may trigger a stock crash.

The US had reported persistently high inflation (+6.8%) recently and it was already behind the inflation curve.

Let's look at the CPI components.

The energy sectors and vehicle sectors are the primary causes for this elevated inflation.

What's gonna happen then?

The US FED will expedite its QE tapering by reducing its asset purchases because interest rate hikes can only be implemented after QE tapering is completed.  Thereafter, the interest rates will rise in the US and cause stock market correction or crash.

The US stock market (S&P) is already in a dicey position now. Why?  Let's take a look at the charts below.

The divergence in the high yield option-adjusted spread (OAS) and S&P 500 in 2020 showed that a crash was in the offing as depicted by the chart.  Let's take a look now.

The same phenomenon is happening between the 30-year treasury yield and S&P.

Is the US stock market in a dicey situation?  Time will tell!

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