Model switches to CASH/NEUTRAL.
The real estate Evergrande collapse in China could be $XXX trillion in fiscal/monetary stimulus for bailouts galore as China is levered to the hilt and Evergrande could be the first real-estate related major domino to fall. It could be China's Lehman 2.0. It would have a profound effect on China's economy. The fall of Lehman sparked the financial collapse of 2008. Of course, China will just print their way out of this mess to avoid catastrophe which is good for stocks, real estate, and bitcoin. Alternatively, China may not bail out Evergrande as it may seek to gain more authoritarian control over this market. This could create further downside in markets around the world.
In addition, with inflationary issues flaring and more members of the Federal Reserve suggesting tapering before the end of the year, markets may be soft for the time being. That said, the Fed does not want to upset the apple cart when it comes to buoying the stock market with a steady or increasing flow of QE, so actual tapering remains unlikely. We also have multi-trillion dollar spending packages on the way.
Expect a tug-o-war to ensue between "to taper or not to taper", thus more rip tides for the stock market.
Market Direction Model - Model switches to CASH/NEUTRAL on September 20, 2021
| Published: | 20 Sep 2021 13:05 ET |
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