An Ideological Path To A Liquidity Crisis In U.S. Markets

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Look out, corporate and middle America!

There’s a new economic and capitalism threat occupying your (Congressional) House…namely, Alexandria Ocasio-Cortez, who has been busy sucking all the oxygen out of Democrats’ House with the unveiling of her socialism-on-steroids “Green New Deal” this past week. As 2020 Democrats jump on board with her plan, Democratic House Speaker, Nancy Pelosi sarcastically referred to it as the “Green Dream.”

If you want to create a liquidity crisis in U.S. equity markets, then go ahead…adopt and enact the ideological measures put forth in that deal/bill. If you want to create an economic crisis, in America, as well as the rest of the world, then go ahead…adopt and enact the ideological measures put forth in that deal/bill. Foreign and domestic investment in the U.S. will disappear.

As it is, U.S. and global markets have been fragile and volatile for over a year, and absurd political games such as this will only suck the liquidity out and increase volatility at an ever-accelerating pace. Offshore U.S. corporate monies will never be repatriated and invested in America. In fact, more funds will be hidden in offshore accounts under this scenario. This deal is a clever counter-measure to President Trump’s Tax Cuts and Jobs Act, enacted on December 20, 2017. When companies fail to bring offshore monies to the U.S. by the 2020 election, Democrats will claim that the President’s policies haven’t worked and that Americans should, instead, embrace their ideology. Any benefits gained from this Act will be shattered. At that time, I was pondering whether the Dow 30 Index would reach 25,000. In fact, it reached a high of 26,951.81 in early October 2018 (just prior to the U.S. midterm elections) before it started to tank and, interestingly enough, it’s hovering just above 25,100, as of Friday’s close.

You can see from the following weekly chart of the MSCI World Global Index that price rallied, after touching major support at 1800, and is now sitting at a critical intersection of a long-term uptrending Andrew’s Pitchfork median and major price resistance level around 2030.

Inasmuch as many Democrats are on board with this destructive deal (adding to political headwinds as I described in this post) and not many Republicans and the business world have dismissed it yet, no doubt more support for it will continue to grow, especially among Millennials.

Just wait until the big bank executives are hauled before Democrat Maxine Waters’ Financial Services Committee (on which Ms. Ocasia-Cortez sits as a member) and watch this political farce continue.

Keep an eye on the MSCI World Global Index, because if that begins to implode, you’ll see U.S. markets follow suit.

Perhaps GOLD will become the favoured hedge for traders/investors against such a catastrophic scenario…and we’ll see the rally accelerate, as I described recently in this post.

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