Fed Turns Bear, Gold Soars - But US Shares?

Yesterday we discussed how company buybacks are propping up a US sharemarket that should be falling on poor and reducing earnings.  Last night typified this market based on free money not fundamentals.  The US Fed announced ‘no rate hike’ but also turned decidedly dovish in its forecast amid a weakening global outlook.  So of course gold surged more than any other asset class last night on the news (see the chart below), up over 2.6% (in USD)... BUT shares too rallied, up 0.7%?  This is yet another example of bad news being good news for shares.  Fundamentals are bad, but that means more free money and debt fuelled buying so up go shares.

This is not a new thing since the GFC.  But what we’ve seen more of in 2016 is a market starting to realise that this is a giant Ponzi scheme and that maybe these central bankers don’t really have control, hence yesterday’s article on the exodus of ‘real’ investors, replaced by company buy backs.  So last night’s rally could soon see the penny dropping sell off.  These daily gyrations are all what you might call ‘micro’ moves.  Tomorrow we will share with you something a little more ‘macro’ that could portend a big move being imminent.