Imagine the following scenario for a second. The US Economy rolls over into a severe recession over the next 6-12 months and the FED attempts to stimulate again. Since interest rates are already at zero, the only other tool they have is QE 4…5…etc… Yet, despite all of their “easing efforts” the bond market stages a massive rally in yields.
Checkmate and game over to the FED and every other central banker around the world…..impossible?
If you have been around financial markets long enough, you very well know that nothing is impossible. As of today, the market is most certainly set up for the scenario above. Given unprecedented volatility, lack of liquidity, potential technical breakout (chart above) and bubbles, the scenario above can develop rather quickly. And I am not the only one who thinks that way.
Finally, should the scenario above fire off, given today’s general overvaluation and bubble stock levels, the stock market can be in for quite a shock. Just something to think about.
