S&P 500 index is back from the brink of a correction territory. It has happened a couple times already when approaching this much dreaded territory in last couple years, which is actually an essential market mechanism to keep the markets healthy. We simply have not had any healthy correction for a very long time.
This time around exactly when the broader market index was about to enter the undesired place of 6300 on March 30, the magic wand made the markets fly up again soon after. NASDAQ had already entered the correction territory by then. This was then – just about 10 days ago.
Fast forward to now. The index at 6825 now is in a shouting distance of the all-time high of 7000 reached in late January. Once again the index is trying to break out of the doldrums after trying it again and again for several times in last couple months and not be able to cross.
We have covered earlier that the U.S. Government and Federal Reserve (Fed) both are boxed in – with very limited or literally no wiggle room via this post back in November of 2025: Fed & POTUS in the Box: Trouble Ahead & Time to Buckle Up.
Ugly things are at the cusp of unfolding. And both of these above entities via their fiscal and monetary policies arm are doing their best to keep things afloat. The question remains for how long they can. It is a matter of months now, not years.
Ill-fated or rather suicidal strategy of tariffs was a first nail in the coffin for U.S. With the Iran war, it is a second and final nail in the coffin. “Sanchit Karma” – accumulation of all good and bad actions over the years are about to speak or rather roar like a lion.
Quantitative Easing or QE by the Fed as it is known is back in the ‘vogue’ to prop the markets. Along with that, the Yield Curve Control (YCC) is a subtle intent behind this all by deploying different monetary instruments to keep the interest rates low. Yet, the 10-year treasury continues to defy the expectations and stay firmly above 4% and constantly eying at 4.5% as finally the “bond vigilantes” and “gold bugs” have arisen out of their long slumber.
With the Iran war “on-again and off-again” approach and now the ceasefire, the oil price continues to flirt with $100 and stay above at times…only to scare and ‘contain’ our ‘evil’ president from making more and more disastrous moves.
All this does not bode well for the U.S. economy and it is only a matter of time that it is pushed into a valley of despair. The gas price averaging at well over $4 a gallon is only a sign of things to come. No where in sight is a “sound and sane” fiscal policy to lift the U.S. out of such doldrums and do more meaningful “visionary works” for the future. Instead, the U.S. is preparing full well to head for the disaster – crash and burn.
All this is not coming cheap. Obviously. Everyone knows that disaster costs money. Folks may not know if we are heading into one. We are to pay a heavy price, a very heavy price, without a doubt. Why? The market laws can be only ‘bent’, not ‘broken’, else, it is like a “Laws of Universe”. Creation and destruction are the norms, not the exception. That is how the universe operates. Further, we also know that only ‘creative destruction’ adds value to the society. Destructive destruction only extracts the value out of communities and countries.
The best-case scenario is the cease fire turns into a permanent solution for the U.S. – Iran war. Even in that case, things do not get much better. It can only stop us from things being very ugly. The worst-case scenario is that the war drags on and we incur additional expense of hundreds of billions of dollars in expense this year alone, let alone the human cost.
What it means is that the closing in on $2 trillion deficit is a near certainty for this year which will be at or over devastating 6-7% of GDP that this presidential administration is completely tone-deaf about and continues it as a ‘norm’ not an ‘exception’ for much of its first as well as second term.
As for the inflation expectations, during the last presidential administration under the helm of the democratic leadership, the U.S. was gradually heading back towards ‘more normal’ level of economy and inflation around 2% to 3% after having it spiked post COVID, it is sneaking back up again more towards 4% or even 5% depending on what statistics we choose to look at and it already is crippling ordinary Americans that the upper echelon does not care about at all.
All this is while the usual market titans such as Microsoft (MSFT) remain solidly in the ‘bear market’ territory with 33% down from the peak where rest of the market continues to stay bullish via rotation into cyclical, energy and less desirable stocks. Ditto is with Tesla (TSLA) at 31% down and the Facebook parent, Meta (META) in a bear territory at 21% drawdown from the peak.
These three are amongst the highest valued stocks, in fact, members of the much coveted trillion-dollar market cap club. That is quite telling. It only means that the earth is cratering underneath the feet of most investors yet they do not realize it as everything looks pretty good to them on the surface whereas the down under it is pretty ugly.
Other ‘stalwarts’ of the market bulls engaged in the market ‘manipulation’ or sheer ignorance such as Oracle (ORCL), Palantir (PLTR), Netflix (NFLX) and Home Depot (HD) are down 60%, 37%, 24% and 20% respectively from their peaks where all of them still sport the market cap of above $300 billion.
What is next? The market game continues in its final innings and more and more ugliness is destined to unravel to the dismay of many investors, unfortunately. In other words, the bear market is getting more and more entrenched without us knowing it in most cases. Stars of the surface are cratering in front of our own eyes and will continue to do so until there is a market capitulation and we are ready for the new beginning.
It will be a long and dreadful wait to emerge out of all the ugliness that is here to stay.
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