“The trend is your friend” as the old Wall Street adage suggests and for good reason. Bull markets usually run for four years or more and bear markets typically last 17 months on average. The primary driver behind bull and bear market trends is monetary policy. Injections of liquidity support economic activity which powers bull markets, while the lowering of interest rates enable price multiples of earnings to expand.

Stock prices are a product of a number (‘x’) multiplied by corporate earnings, which is referred to as the Price/Earnings Ratio, or ‘P/E Ratio’. During a bull market, investors are willing to pay more for each dollar of earnings, allowing the P/E ratio to inflate, sending prices higher. Bear markets are typically the result of liquidity being withdrawn from the financial system; this activity frequently causes a recession. A lack of liquidity leads to higher interest rates which creates a reduction in the P/E ratio, thus lower stock prices.

Changes in monetary policy by any of the major central banks are not contained within that domestic economy, they spill over into the global economy. A change in the value of the U.S. Dollar or Euro will send ripples throughout the global economy that can have a significant effect on emerging economies and commodities. Having a deep understanding of monetary policy and the currency market is an integral part of forecasting market behavior.

Each month, Macro Tides Global Economic Report delivers in depth market analysis with a heavy emphasis on Monetary policy, traditional Economic analysis, a broad array of Technical momentum indicators (including his proprietary Major Trend Indicator), and numerous Sentiment measures. The Report highlights our positioning in the primary futures markets and covers basic charting analysis to quantify the trends in the Dollar & Euro currencies, Treasury bonds, Gold and Gold stocks, and the global equities markets, specifically the U.S., Europe, China and Emerging Markets.