Why the US market needs to go up (and what next)

You already know the US markets are ripping relative to the ASX over the last 6 months.

But what’s this?

Is the S&P 500 stuck in a range now?

Source: Koyfin

[Click to open in a new window]

Over the last month – looks like it.

Cue the “sky is falling” narratives!

But remember, Warren Buffet said “never bet against America”…

But this time its different (they say)

America is a crumbling empire, the Chinese have us beat on tech.

China does 5 years plans.

American election campaigns run year-round.

They’re doomed!

Honestly… this all blah, blah, blah, to me.

I’m in the US right now, and nothing has deterred me from an opinion that the Yanks are an absolutely unhinged posse of savages.

This entire country’s politics are like the WWE.

Lots of pageantry and a lot of fake fluff.

My Uber driver here tells me he used to watch his neighbour Ric Flair mow his lawn in his underwear.

(Seriously how can I make this up.)

Not to mention I’ve already seen Dave Chappelle at a bar in New York.

Point is – this country is on steroids

The same critique of WWE and US politics could also apply to the US markets.

The AI trade will unwind.

The data centre rollout will collapse.

Too much debt.

Taiwan.

And on, and on, and on.

But there’s something real here

Call me crazy, but America is kind of awesome.

People work for tips, so you get served with a smile.

You can speed on the highway.

Heck, you’re more likely to get pulled over for going the speed limit.

(Only drunkards drive the speed limit, obviously)

A Pabst Blue Ribbon tall boy (25oz, essentially a longneck) costs 5 bucks at a bar.

And divorces?

Heck, we’ll do you one for just US$599:

Source: Lachlann Tierney

Is that all?

So what’s not to love?

Look, I’m not saying it’s perfect

I’m working on a theory that America needs to be messy so the rest of the Western world can afford to be haughty and “civilised”.

And likewise, its markets need to go up, or else its end times.

Call it “line go up” theory.

Money and the apocalypse.

Or more precisely, more money or it’s the apocalypse.

And I’m not saying buy the US-based hyperscalers (Meta, Google etc.) – they are now fixed income beasts due to their monumental corporate bond issuance.

No wonder these proxy-bond exposures are dragging the SP500 sideways over the last month (see chart above).

What I am saying though is…look at the second layer of the AI trade.

The nimble companies that apply AI.

The companies capped at US$1BN (they call that a small cap in America)…

And then, domestically…think ASX commodities.

Call it my own personal “broken record” theory.

So I’ll keep saying it.

The only way we can see inflation come down in the US and Australia is if we dig more stuff out of the ground and turn on the mining CAPEX taps.

Which means…

Over a long enough timeframe, this thing has to go to the moon like a SpaceX rocket ship.

And if the S&P 500 rocket ship blows up on the launch pad…the crazy Yanks will build another one.

Hate it or love it, the US empire is still on top.

Call it US market exceptionalism.

Tomorrow, more from the belly of the beast.