With the stock market hitting all-time highs, everybody wants to know if we are in a giant bubble.
You can’t trade and make money if you’re not in the market. If the fear that we are in a bubble is keeping you out, then you’re not making money.
The honey badger doesn’t care. The honey badger loves to climb walls of worry.
You can get an early read on which way the market is headed by tracking transports. Fedex is a bellwether stock in the transports industry.
Remember folks, bull markets don’t die of old age, they are murdered by the Fed.
The chart below shows profit margins [blue] are falling as employee compensation [brown] rises.
Since 2015, employee compensation has started to recover as the labor market tightens and corporate earnings are falling (as a % of Net Value Added).
If you look back to the 1960s, you can see that when the labor market reaches capacity, profits fall as labor costs rise. The Federal Reserve intervenes to battle inflation from rising wages which will cause the next recession. The Fed does not usually intervene in a meaningful way until wages rise above 74% of corporate profits. In other words, we have a long way to go regarding rising wages before the Fed is going to hike rates so high that it causes the next recession.
Financial Education posted this video on if we are in a giant bubble. While I don’t agree with everything he says, he does make some good points IMO.