As goes the first week of January, so goes the year?
That has been a hackneyed Wall Street adage for ages. Some investors prefer to look at the performance of stocks for the entire month instead. But the general idea is the same: If the year starts lousy, it’ll finish lousy.
Me? I don’t put much faith in that kind of calendar-based stuff. This column from MarketWatch back in 2012 gives some of the statistical reasons why the indicator doesn’t mean much. Here’s another one from Forbes.
Instead, I’ve been waving my arms around like mad and warning about impending trouble since last spring for a much different reason. Simply put, market fundamentals are falling apart!
You have the commodities business in freefall, with pricing and demand falling off a cliff. The Baltic Dry Index that measures the cost of shipping various resources by sea just fell to 471, the lowest level in its 31-year history.
|Simply put, market fundamentals are falling apart.|
You have demand for Initial Public Offerings falling off the table, with total deal volume coming in at just $30 billion thanks to a late-year swoon. That makes 2015 the worst year since the crisis year of 2009.
You have the auto loan boom/bubble sputtering and threatening to implode. That’s going to be a major problem for a key sector of the economy, one that helped prop up overall employment and GDP for the last half-decade.
You have high-yield bond spreads exploding to their widest levels since the tail end of the last recession. And if anyone tells you it’s just energy, plug your ears and run like heck! Spreads are widening fast for bonds in several other sectors.
Lastly, you have the Federal Reserve starting to raise interest rates based off the message sent by the employment statistics. But the unemployment rate and job creation figures are lagging indicators. They weaken after sales start to fall, inventories start to surge, lending standards start to tighten, and asset prices start to slump.
That means it’s increasingly likely history will show the Fed waited too long to began a hiking cycle. And therefore, it’s only going to make an already tumultuous environment even more volatile.
So I don’t think the recent stock market weakness is a problem from a CALENDAR-based perspective. I think it’s a major problem from a FUNDAMENTAL-based perspective. It tells me the previous worries I had about this being a new bear market were on target … and that the strategies I outlined in September 2015 are even more important now in January 2016.
I provide more details on what to do — to protect your wealth AND profit — in my Safe Money Report newsletter. I just released my gala forecast issue for 2016, and it has details on all these trends … as well as new “Buy” and “Sell” recommendations.
But, in any case, buckle up for a wild ride in 2016!
Until next time,
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