Can the Fed Ease the Economy Back to Growth? History Says No

The Fed meets today and tomorrow.

Based on hopes of a rate cut, traders are attempting to force a breakout in the stock market.

Having broken their downtrend (blue lines in the chart below) and overcoming resistance (red line in the chart below), stocks have been consolidating in a triangle pattern (purple lines in the chart below) over the last week.

As I write this, the market is attempting a breakout… but we need to see follow through here for this to be a confirmed move.

Breadth, which leads price, suggests the final upside target is somewhere around 2,940 or so on the S&P 500. But if we get to that level, the market might as well push for a new all-time high.

What happens then remains to be seen… but the fact that the market is rallying largely on hopes that the Fed can somehow ease financial conditions enough to overcome a global contraction is an EXTREMELY dangerous environment.

The last two times the Fed eased into a contracting economy stocks lost ~50% in the following 12 months. 

Will this time prove different?

Copper, Treasuries, Fed Ex and Oil all say “NO”… they are all forecasting that fair value for the S&P 500 is at 2,500 or lower.

Bear in mind… this is based on an economic recovery hitting in the second half of this year… if a crisis hits, a 50% drop puts S&P 500 down at 1,450.


So while stocks may hold up for a little longer based on hype and hope… economic reality tells us we’re primed for a major collapse.

The bull market is over… we’ve had a failed backtest of the former trendline. The next move is DOWN.

Those investors who take the right steps to prepare for this, will make literal fortunes.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

Today is the last day this report will be available to the general public.

To pick up one of the last remaining copies…

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research