Gold & Precious Metals
A friend of mine just emailed me the chart below. Considering the fact that we just witnessed 7 full years of ZIRP (zero interest rate policy), I probably shouldn’t be surprised just how massive the investor migration into risk assets, like junk bonds and leveraged loans, has been. But I am.
The market continues to have abnormal price volatility with not much of a consistent trend. Uncertainty is high making it a poor environment for trading unless you are very short term oriented. Great time to be a day trader but for a hold period any longer, it is difficult to succeed. I recommend longer term traders sit on cash right now and wait. Great opportunities usually follow corrective periods.
If the energy sector can get some relief, the overall market will as well. Ed Yardeni, of Yardeni Research, notes that S&P 500 earnings fell 14.1% in 3Q15 over 3Q14. But that becomes a 3.4% rise in earnings when the drag from the energy sector is removed. Of course it’s a lot easier to do that math on paper with conjecture than it will be for energy to actually recover.
The turnaround will need to happen soon. History shows that corporate profits tend to drive the ups and downs of the business cycle. Profitable companies increase advertising spending, increase capital investment, hire new workers, and raise pay to poach talent from other companies. Unprofitable companies shrink.
As you know, the U.S. stock market just began the year with its worst January performance since 2008. Hmmm. And what happened later in 2008? To that end, we have been projecting an end to this current bull market in stocks since the August 2015 appearance of a “death candle” on the charts. Today, we provide an update.
It’s important to note that this forecast is not something we just stumbled into a couple of weeks ago. We first noticed the stock market rolling over in early August of last year. And now here we are on February 1, 2016. The year began with a steep, global selloff in stocks but the past 10 days have seen global equity markets bounce back a little on a $5 bounce in crude oil and some overt currency manipulation by the Bank of Japan. So, is that it? Are equity investors “safe” as the markets resume their bullish trends? Well, please allow me to remind you of how we got here and the similarities to years gone by. After that, you can decide for yourself.
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