The stock market is below where it was last April

The stock market has been moving sideways – down for more than a year; it is below where it was in April of 2015. The market’s fundamentals have continued to deteriorate even as the market has been sprinting higher over the past month. For example, sales have continued to drop while inventories have been soaring. The ratio of inventories to sales has increased to a level that is only, and without exception, seen before recessions.

One of the main problems underlying our extremely sluggish economic growth is the seven-year-long zero short-term interest rate by the U.S. Federal Reserve. It has hurt much more than the savers who cannot find suitable yield. It has destroyed price discovery. For example, the interest rate on the U.S. 10-year note closed Friday at 1.7%. Before the current bubble economy, that would be very low for a short-term rate.

Here’s the chart of the S&P 500:


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