US Stock Market Trending Up
Canadian Stk Mkt Trending UP
US Bond Yields Yields Trending Down (means prices go up)
Jeff’s Weekly Stock Market Commentary
Over the last six months, I have taken the position that global growth has been slowing and that it will result in slowing growth here in the United States. Keep in mind that I am not saying that the U.S. economy is going to enter into a recession. Instead, I am referring to the rate of change and the slope of the growth curve.
Growth slowing means that the economy can continue to grow, but it is growing at a slower rate. Slowing growth means that there is less demand for goods and services which generally makes it harder for companies to continue to grow their sales and profits.
China just released numbers that confirm that their economy is slowing quickly. It was expected that China’s March export numbers would be 12% higher than the previous month. Instead, the actual number revealed a 15% drop in year-over-year exports. That is a 27% miss to the downside. China’s imports were equally dismal falling 12.7% year-over-year.
Stock markets nowadays don’t track a country’s underlying economy. In fact, there seems to be a huge disconnect between economic and stock market performance. So, on terrible economic news China’s Shanghai composite went UP 2.17% and their market is up 27.42% year-to-date. Their market went up on the bad news because investors believe that China will be forced to further stimulate the economy in hopes of spurring growth.
In other words, all of the world’s major economies are following the same ‘stimulus’ playbook that Japan has been following for over 30 years. Yet, Japan still has not been able to achieve their inflation targets nor economic growth. This is the same playbook, by the way, that resulted in the stock market crash in 2000 and 2008.
We all know that we are in another bubble; what we don’t know is exactly when it will pop. Since there is considerably more leverage in the markets now than there was in either 2000 or 2007 it is reasonable to assume that when the next crash happens, it could be even more severe than what we experienced in 2000 and 2008.
That should be a warning sign for those of you that are retired or near retirement. Priority number one for you must be avoiding significant loss. If you put yourself in a position where you could lose 20-30% or more of your assets in the next crash it is unlikely that you will ever recover. If you still have a significant percentage of your wealth invested in the stock market I would caution you to become more conservative..