A huge dichotomy between stocks and bonds

The stock market (i.e., Dow and S&P 500) is at a historic high. Historically, this happens when the economy is great and roaring ahead. Obviously, this is not the case: Growth is tepid, ninety-five million working-age adults are not part of the work force, and business inventories are ahead of business sales by a factor of 1.4 (this number has previously only been seen in recessions) – just to name a few items. At the same time, U.S. government bonds are near historic lows in interest rates. This has happened in the past only when the economy is terrible and getting worse. There has never been a case of these two opposite signals happening at the same time! I think, this makes it more likely that this gigantic mother-of-all bubbles will blow up very soon.

The Nasdaq Composite is below it’s 2015 high while the S&P and Dow are in free space. The Nasdaq contains most of the country’s big technology companies. The stock market is not going to be able to make solid progress without technology leading. The short-term recent upswing has money flowing from former defensive (e.g., utilities, food and beverage) measures into the Building, Basic Materials, Electronics, Apparel, Bank and Financial Sectors. Most of the remaining growth sectors in the Technology and Cyclical Groups have been shallow gains.

Here’s the graph of the Nasdaq Composite:

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