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Hate to say "I told you so" but we did: America's Economic Time is worsening, so profits have to decelerate...

There was a tinge of Schadenfreude in this past weekend's press. Finally, investors are grasping two points that we have been making for a good year regarding the US stock market:

1. higher rates are starting to bite, and thus...
2. the profits outlook for US corporates must worsen.

We never did follow the logic of those telling us to buy when US Fed Funds peak. They peak only when the Fed decides that high rates are biting into end demand, as indeed they are now. Witness the gloom gripping the US housing market and the US profits outlook.

In the context of The Economic Clock: America's Economic Time is worsening:

* its excess supply of money is evolving into an excess demand for money, and thus,
* its excess demand for goods slowly is evolving into an excess supply of goods.

This has been going on for most of the year, and that is why the S&P has risen a meager 5% - if you rode out its 8% slump from 8th May - 13th June. You would have done just a little better buying investment grade US dollar bonds or longer - dated time deposits - without incurring the roller coaster risk!

S&P 500 1-yr chart:

S&P 500 1-yr chart

Investment implications: avoid the US stock market. Go into long USD bonds. Avoid the US dollar. If you must be in America, then pick shares that have strong exposure to China, India and Europe.

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Source: America's Economic Time is Worsening. Implications: Only Buy Equities With Heavy Foreign Exposure