America’s Ponzi Scheme – Social Security Is Broke Now
Crude oil prices have historically been an economic barometer that can indirectly indicate, and sometimes lead, upcoming direction in other financial asset prices. This can be seen in the periodic positive correlation between oil prices and the S&P 500 during the past decade.
A number of well-respected market commentators have recently pointed out that corporate profits appear to be reversing. This is an important development since corporate profits typically peak before bear markets and economic recessions.
In spite of all the headwinds for gold, one factor remains puzzling. US real rates have collapsed recently. The 5-year treasury real (inflation-adjusted) yield is now deep in the negative territory and the 7-year real yield is approaching zero.
So the second estimate on first quarter GDP was released today – down 1 percent instead of up 0.1 percent. This was the first decline since 2011. Does that mean we’re headed for recession? The financial press has defined a recession as two negative quarters in real GDP. Is 0.1 percent really a decline worth noting? I think not.
There is a sea of economic green spread out across the country as 48 out of 50 states are projected to continue economic expansion over the next six months. Confirming the health of the stock market is the new high in the cumulative AD line for the S&P 1500, which typically peaks well before the market.
Signs of a market bottom have been building over the last week with today serving as no exception. Today, we received the Markit Economics flash composite purchasing managers’ index for May, which hit a 4-year high of 58.6, up from 55.6 in April and up from last May’s 54.5 reading.