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The stock market is irrational more often than not. For the past year, this has been a permanent state of affairs.
The economic truth of it is that US inflation was never going to fall back into its sub-2% range without a recession. The negative implications of this for earnings has set strategists against the market and established a base of weak sentiment.
This weak positioning has then been repeatedly gamed by traders. They have been so successful at it that the stock market has dragged the economy up and down with it, along with consumers and the Fed.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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