Doubts about the economy have been at play in the market’s tentativeness as well. The U.S economy did reasonably well in the second half of 2013, but lost momentum at the start of this year, with weather getting all the blame for the slowdown.
We have liberals and progressives who use data to demonstrate the correlation between income inequality and recessions or slow growth and then erroneously equate correlation with causation. I think we have sufficiently shown the absurdity of their conclusions.
Jim Bianco warns that China may be in a hard-landing phase right now as economic data continues to deteriorate and more funds flee the country. When asked what the implications are for other markets, he said that it will certainly cause a problem, but he’s not expecting an ’08 crash.
Over my 27 years in the business, I often discuss bull and bear markets with investors. A couple of popular beliefs frequently surprise me. The first is that bear markets are rare events. Investors are still surprised, some even shocked, that two bear markets, 2000-2003 and 2007-2009, took place within a nine-year period.
Over the course of the last year, and except for the close front-end, US treasury yields have risen across the board, and in some cases dramatically. This is what one would expect from a tapering Fed that is also discussing rate hikes.
John Butler made an interesting comment in his recent interview. He said, when you look at the Fed’s balance sheet, one can argue that the Fed really isn’t pulling back on its stimulus to the markets at all. In fact, Butler explained, it may actually be loosening instead.
The Q4 2013 ratio is 67.9%, fractionally off the all-time high of 68.6% in Q1 2011. From a theoretical perspective, there is a point at which personal consumption as a percent of GDP can't really go any higher. We may be hovering in that upper range.