Everyone is watching the Federal Reserve.
Will they cut? Will they not?
The most important driver of the market is the 18.6-year real estate cycle. And it has been like that for decades.
The Fed, mind you, responds to economic data.
And what drives that data is the cycle.
So, the Fed watchers are looking for effects while they should be focused on causes.
What Drives the Market?
The prices of land and real estate have been driving not only their own markets but also equities and commodities, as well as bonds, for centuries.
That’s what my analysis of the 18.6-year real estate cycle says.
And now that we’re in the “Eleventh Hour” stage of the 18.6-year cycle, markets accelerate.
This, from CNBC:
The S&P 500 jumped to a record and closed above 5,400 for the first time Wednesday after the Federal Reserve’s latest policy announcement and May inflation data pointed to easing pricing pressures. […]
Wednesday’s announcement followed the release of fresh U.S. inflation data, which seemed to suggest a cooling trend.
Wait a second…
The “hawkish” announcement followed weak inflation data, and now the markets are touching record highs.
What gives?
Aren’t the Fed’s hawkish remarks supposed to be bad for the markets?
Well, this is not what we see.
They Will Cut, and It Will Help the Cycle
The government market players aren’t the savviest. And I include the Fed in this category.
They play catch-up based on data they receive with a lag.
And that’s fine. Their goal isn’t to make you money. Their goals are to keep inflation and unemployment low.
I am not going to get into the whole discussion about how effective the Fed is at its mission. And whether its goals have anything to do with how the real economy works.
The most important role that the Fed plays as far as I’m concerned is accelerating the cycle when it’s in the “Eleventh Hour” stage.
Which it’s doing right now.
Not as fast as markets would prefer, true. The market would rather see interest rates fall off a cliff.
That’s not going to happen. The Fed was slow to respond to rising inflation, and it will be slow to catch up when it falls.
But the 18.6-year real estate cycle will continue pushing markets higher… and the Fed will press the accelerator right at the top of the cycle.
That hasn’t happened yet. The cycle still has room to run before it’s too late to join the party.
Now, however, is just the right time.
Regards,
 |
Phil Anderson
Contributing Editor, Inside Wall Street with Nomi Prins