Last year the Fed increased the supply of US dollars in the financial system (M2) by 26% – the single largest annual increase since 1943. The Fed has nearly doubled the size of its balance sheet in the last 12 months alone, and nearly 10x’d its balance sheet since the financial crisis of 2008. 1. Corporate earnings are DOWN. The average Earnings per Share in the S&P 500 is 30.47% LOWER than prior to the pandemic. 2. Corporate revenue is also down. Yet corporate DEBT is substantially higher. 3. The US economy as measured by GDP is weaker. Consumer spending is still lower than before the pandemic. Unemployment is higher. 4. Government debt is hilariously out of control, and the new ruling party just announced that they want to raise taxes. Lower profit, lower revenue, higher debt, higher taxes – NONE of these trends should be favorable for stocks. Yet the market is UP, with the average Price/Earnings ratio in the S&P 500 now an incredible 40x. I would point out again that gold has a 5,000 year track record of performing well during times of inflation. It’s also among the few major asset classes that’s NOT currently at a record high.
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