Hard Landing

QUESTION: Dear Mr. Armstrong,
I have a question that might interest not just me but also other blog Readers:
In your blog Posts you write that you expect that we will have a hard landing going into 2020.
My question is: What does that mean for the Dow? Do you expect the dow to correct into 2020 more that 20%.
Thank you for your work and best Regards,
A

ANSWER: The hard landing is economic and will have its greatest impact outside the USA. While central banks have sold US Treasuries in an attempt to keep the dollar down, the private sector has been pouring assets into the USA and particularly the Dow. Our capital flows have tracked a significant shift in global capital flows into the USA especially from Europe. That should come as no surprise given the chaos in BREXIT as well as the May elections.

We still do not see a major correction in the Dow. We have been undergoing a shift from public to private assets on a global scale. Therefore, the hard landing will be more economically based and central banks will try to do something, as in lowering rates, but they have run out of bullets. The Fed has tried to back off on rates after buying into the problem of a hard landing outside the USA. The ECB has been on its hands and knees, pleading with the Fed not to raise rates when they will have to continue their QE programs or face sovereign debt defaults.