US economy is in a very good shape. What about financial markets?

As you can see, HST Fundamental Indicator is positive and in a high position.
US economy is fully recovering after the hit given by pandemics, with most indicators showing improvement signals, with few exceptions

Housing market is in very good shape

Unemployment is gradually going back to normal

Industry and commerce are also getting better and bette

The only concerns are coming from a rising inflation, which could force the FED to increase rates soon, and this could hit many companies which are investing and have remarkable debts in charge.

But - with a wider look - inflation is far from being "high" (data from FRED) and financial conditions (= how hard is for companies to get money to fund their investments) are still very easy today.

Bottom line:

Macro data and economic fundamentals of US economy are very strong.

The real, hard concern comes from the following point, which I have expressed in my last article dated March 25

"Since markets are two steps ahead, we think that a correction of financial markets could ironically come when very good news about vaccine campaigns arrive, because markets (especially tech stocks) have already priced the good recovery that hasn’t been, and with real good news coming, maybe all the easings on money flow given by Fed could get to an inevitable plateau.
When reality is “as good as it can”, markets do not see room for further growth, and sometimes collapse, if overpriced.

Are we at that point now?"

What do we see, on May 1st 2021

1. FED won't give so much credit for much more time
2. Government won't approve many (or any) more stimulus packages (increasing Federal debt even more could be very dangerous)

...they are not saying it yet (the positive effect of stimuli could vanish if they do), but we are probably near to an end and then to an inversion of this very "easing" period provided by federal institutions.

So there could be some more bull legs for this recovery after the big hit of 2020Q1, and the long term future (give the good shape of the economy) is most likely a period of growth, but the chances for a sharp correction are increasing, and we think they will show up when FED decides or simply talks about rate hikes.

So, we should get the benefits of possible bullish legs coming in near future, but after that, reducing size of position could be a good idea.

(As always, the calculations of the HST model will always consider a full capital investment, with no increase / reduction of sizes.)

Hari Seldon Trader

-----------------------------------

Write to This email address is being protected from spambots. You need JavaScript enabled to view it. and get more information about daily signals from the HST model released to members.