By Mark J. Lundeen
Before the November election, seeing 75 million shares traded for the thirty Dow companies was a very typical day. Then beginning in the first days of December, daily volume has consistently been in the hundreds of millions of shares for weeks now. Exactly where this post-election demand is coming from is a mystery to me. But I doubt retail and institutional investment demand is responsible for most of it.
No matter; this doesn’t change my opinion on the stock market. I see a day coming when everyone will look back at late winter 2017 and agree that financial markets were seeing the last good days of a gigantic-mega bubble being inflated on Wall Street by the Federal Reserve. The market from here may go higher. But after it crests comes the deluge.
It’s not hard identifying an inflationary bubble blown into the stock market. The difficulty comes in believing it’s not real during the inflationary phase; the period when prices seem only to go up. But all bubbles must deflate, and deflation makes everyone a believer in the uncertainties of life.