Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Financial Markets - There Is No Silver Lining

Stock-Markets / Financial Markets 2015 May 13, 2015 - 10:38 AM GMT

By: Harry_Dent

Stock-Markets

Rodney Johnson writes: As I read the news and watch the markets, I’m struck by the yawning difference between what’s going on with the economy and what is happening with equities.

I know the worn out arguments. 

People are buying stocks because they don’t have many choices. That’s fair, to some extent. The return on stocks (dividends, expected earnings growth) is higher than the interest paid on bonds. 


Then there’s this one: Foreign investors moving to U.S. dollar-denominated holdings are driving up prices. 

And my favorite: Stocks will keep going up because… they’ve been going up. I’m not sure how that makes sense, but I guess it follows some thread of logic.

There is some truth in each of these, but we need to keep one overriding factor in mind. 

For years the silver lining has been growth in the equity markets. Every time we’ve discussed weakness in other parts of the economy, someone has always yelled: “But look at the markets!” 

Clearly it’s true. Many people have made tidy sums over the past six years through investments… even if their paychecks have remained modest. 

However, the silver lining is always in contrast to the cloud, and in recent years it seems as if people have forgotten the cloud exists. Not only is it still with us, but it’s growing more ominous by the day. 

First quarter gross domestic product (GDP) was just released. For the first three months of the year, the U.S. economy grew at an annual rate of 0.2%. Note that this is the annual rate. The actual rate for just the quarter (one fourth of the year) was 0.05%, which is about as close to zero as you can get and still be positive.

This level of growth comes on the heels of our Fed printing almost $4 trillion, our mortgage agencies allowing home loans with a mere 3% down while conforming mortgage rates sit below 4%, and new car loans charging less than 3% interest. 

With so many forces propelling the economy forward, we should be growing at 3% to 4% per year, not struggling to understand why we’re sitting close to zero. And yet, here we are, looking forward to another year of subpar growth — and it’s nothing new. 

The Federal Reserve estimates GDP growth at every regular meeting, and they’ve been woefully wrong in their assessment for half a decade. 

In late 2010, just as they launched the second round of quantitative easing (QE), the Fed projected 2011 growth at 3.3%, 2012 at 4%, and 2013 at 4% as well. 

It didn’t work out that way. 

GDP grew 1.6% in 2011, just a smidge below the Fed’s 3.3% expectation.

Still, the group was undeterred. In January 2012, they estimated growth at 2.5% for the year (lowering their previous estimate by almost half), thought 2013 would grow by 3.0% (a point less than previously thought), and pegged 2014 at 3.7% (just under the prior estimate).

Their 2012 figure of 2.5% was close. The economy grew by 2.3% that year. But subsequent years failed to live up to the lowered expectations. GDP grew 2.2% in 2013, and 2.4% last year. 

Notice a pattern?

No matter what we’ve done to encourage lending and borrowing, economic growth remains anemic. This cloud is starting to blot out the bright light of the equity markets, which appear to have recently noticed that everything’s not sunshine and roses in the economy. 

On a recent portfolio investment call at Dent Research, as usual we polled everyone for their opinion on the markets. The group includes Harry Dent, myself, Charles Sizemore, Ben Benoy, John Del Vecchio, and usually Adam O’Dell, but he was on vacation that day. 

As the rest of us went through our notes, I was struck by a common theme. We all noted that the markets continued to advance, but none of us could tell why. 

At one point I asked everyone for a single answer on what could propel the markets higher. The only response was that the Fed could keep holding interest rates near zero a bit longer in the face of bad economic news. 

That’s probably the best commentary of all on this cloud — the only positive is that the economy is so weak, even with all the stimulus and booster initiatives, that the Fed might not move short-term rates off of zero for another four to six months. 

Pardon me if I don’t break out the champagne. 

With six years of strong equity growth on the books without a significant correction, and the U.S. still suffering with weak growth, the chance of a break in the markets seems to grow with each passing day. 

We’ve reiterated this point many times, but it bears repeating — be cautious. Now is not the time for added risk or speculation.

If you employ an investment process, pay close attention to your stops and sell signals.

If you don’t use a system, take the time to review your holdings to see if any pruning of gains is in order. When the current cloud starts to rain, it could quickly turn into a flood.

Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2015 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules