macro factors lining up, page-4

stan druckenmiller - pretty much the greatest individual fund manager of the past 50 years says the equity market tide is set no1 by net liquidity.

lots of times net liquidity doesnt change much. not changing - not a factor at all. but when its changing a lot it is the factor

if net liquidity is positive - ie US is pumping money into the markets that isnt being soaked up by corporate and FOMC bond issues - the market rises

thats been story since mid March.

March 15 $us6t expansion in FOMC balance sheet which its been using in part to buy its own bonds, and in part to buy retail bond funds - did this to ensure the bond market remained liquid so corporate debt issues and rollovers could take place. stopped oil patch going into massive bankruptcy etc

March 27 $us2.6t given to businesses and individuals in 3 month emergency handouts

but this month it flips from net positive liquidity to net negative. the FOMC is slowing its bond repurchasing program.

ie buying $us75bn a day when the market first went nuts mid March. Gradually dialing that back Next week it will down to $us4bn a day

https://www.zerohedge.com/markets/fed-again-tapers-daily-treasury-purchases-4-billion-day-next-week

Same time US has to pay for all that by issuing fresh bonds which it just started to do.. There is also apparently about $US1T in fresh corporate bond issuance planned for this month alone

And then - late this month - final CARES package support payments from the emergency income support program stop

So there's a massive reversal in the money tide right now - happening right under your feet - so to speak.

2nd tidal effect - GDP as it reflects through earnings, and esp for the US - consumption rates (cos US gdp is 70% domestic consumer)

Earnings arent directly gdp linked 1-1 - but there's a moderate to very high correlation depending on which sector.

Retail/consumer discretionary has the highest correlation - so if GDP is bad that will show in earnings.

If Druckenmiller is right- absent a fresh US stimulus round - market should go into high speed reverse for no apparent reason. technicians will point to a headfake double top in the nasdaq - but that isnt a cause, just a symptom.

thats why Trump wants another $US1T pushed out in payroll tax cuts. Cos that way he can keep the market bubble inflated - esp because tax cuts have supersized impact on equity valuations.

not thats hes smart enough to know that. but his wall st string pullers/backers certainly are

then you'll see June qtrly earnings season in July - which is when the other foot would be expected to drop.

If BLS NFP is as misleading as I believe, GDP and in particular discretionary spending will take a leg down - and market falls would really pick up speed. especially without extension of CARES package

mainstream media will probably latch on to a fear of wave 1 part 2 causing renewed shutdowns as the reason - but it wouldnt be the main one

there's basically 1% upside risk to 99% downside risk in broad US equities currently - absent a fresh shift to positive net liquidity