The money supply growth rate is slowing down and the ECRI leading economic indicator started declining on a year on year basis at the end of last year. This is not a pleasant cocktail for the stock market bull.
Since the stock market peaked at the end of June and the above indicator peaked around the same time, it now appears desperate yield-seekers are realising relative returns matter on the downside as well. As I wrote in April (The Case for Cash),
Today, we are in the upper extreme part of the curve where the S&P 500 will yield 3.65% annually in perpetuity if both the price and 10-year average CPI adjusted earnings remain unchanged. With the 10-year treasury yielding 1.95%, this might sound like a reasonably good deal. But it’s not. It’s a dreadfully poor compensation for taking on such a tremendous amount of risk at a time when the stock market is at all-time highs... Simply put: at this stage the probability of stock market prices dropping is high.