Markets opened down sharply yesterday. The S&P 500 was at -1% as I penned this. The Dow was down 1.25%. Nasdaq in the red at -1.29%. Nothing to change my current forecast of that Dark Window for most of this year.

In fact, I’ve been bullish on the stock market since Trump’s surprise victory in November 2016 and that infamous extreme overnight reversal in prices from down to up.

The markets smelled tax cuts and de-regulation: a free lunch for them after the financial system and Wall Street got their free lunch from massive QE. Tax cuts would boost profits and cash flow and that would be the best single thing that could happen for the stock markets…

But what about the economy?

And why does such stimulus always go to the elite players in business and finance and not us “average” Americans?

Trump and the republicans claimed his tax cuts would create capital investment in new plant and equipment and more jobs… thereby benefiting everyday people.

I didn’t believe it. It couldn’t, for one simple reason: Companies didn’t need more capital investment. They were already (and remain) over-expanded in the debt and bubble economy into 2017.

Turns out I was right. Look at this chart from Bloomberg:

 

This chart measures capital expenditures as a percent of free cash flow and shows a decline since the tax cuts hit in January 2018.

Now, there was still an increase over the year before, and it’s slightly higher than in 2017, but mostly it’s still business as usual.

Instead, companies are clearly using their increased cash flow for stock buybacks and for plugging sagging operating margins that declined from 4.1% to 3.3% in 2018…

Another cover-up for an artificial, B.S. economy created by non-stop free lunches.

The recent NABE (Nation Association of Business Economics) survey shows the same thing. One year after the massive tax cuts, 84% of businesses had no change in capital investment or hiring plans. That’s worse than the 81% in the third quarter. January 2019 levels fell to the lowest since July 2017 – before the tax cut. Plans for hiring also went down a bit, not up.

The only good news is for tech firms – the FAANGS!

That would be in line with one of the scenarios I’m monitoring for you, wherein the Nasdaq and tech stocks do better than the S&P and Dow in a final blow-off rally before Wall Street finally realizes that this tax cut stimulus game has now run its course.

That’s the Dark Window I’ve been talking about lately.

If we continue to see signs that this Dark Window scenario is building, then the tech stocks are the best place to be… after everyone pronounced them “dead” in 2018.