I can truly say I have no idea what the markets are going to do from day-to-day.
I believe the bias is to the upside in stocks as central banks across the board are providing “liquidity” by buying up problem paper from them and then the banks deploy that into the markets, including the Fed, which deploys funds as the older paper rolls off its balance sheet.
Sovereign bond markets are so manipulated you really can’t look at them as a barometer of risk through yield and price, because central banks have crowded out the natural buyers. With this move reading the markets has become perverted.
So let’s look past the US markets and see if there are economic readings that give us a better reading.
First quarter GDP came in at 0.2% annualized. That means first quarter “growth” came in at 0.05%, backing out the massaging of certain variables in the equation used to determine GDP would put the number in negative range.
But what about the American consumer?
Well let’s see what they are not doing. Spending. Discretionary spending is at the bottom and the barometer for that is retail sector.
Major US retailers have announced they will close 6,00o stores so far this year.
From teen shops
180 Abercrombie & Fitch
150 American Eagle Outfitters
To discount stores:
340 Dollar Tree/Family Dollar
66 Bottom Dollar Food
To big names:
1,784 Radio Shack
200 Children’s Place
28 Kate Spade Saturday & Jack Spade
400 Office Depot/Office Max
100 Pier One
So this is what a “recovery” looks like in the US in 2015. If this is the feel good times in the economy, then we are in trouble. And yet the markets — as perverted as they are — are whistling past the graveyard “saying all is well.”
Stocks supported by corporate buybacks are beating expectations and continue moving higher, based on “stocks are treating cash the best.”
And that will work until it doesn’t. The question is when will it not work? Personally I have been out of stocks for a while and have missed the last 5% run up, so you could say I missed it.
On the other hand, I have slept pretty well, so I got that going for me.