Investors flock, while leaders flee

I’m having a difficult time figuring out what the markets see, that I don’t.

Yes we have President-elect Donald Trump coming into office in 6 weeks or so. The perception of regulation easing and increased infrastructure spending have many sectors soaring.

But we have other heads of state running for the exits this week: Italy, New Zealand, Bulgaria governments are in flux over these seemingly separate decisions to leave office early.

We also have the fall out of Brexit, Italeave and as always, Greece to deal with in early 2017.

Change and upheaval are not the things that put the Volatility Index near an all-time low and US indices both broad and narrow are hitting all-time highs.

Perceived regulatory rollback is the driver here in the US, but the demise of the euro could be on the table in early 2017, and that’s not in the market at all.

As I have often said the Dow is not the economy and like now, don’t march in lock step.

With ECB head Mario Draghi giving the market a mixed message this morning with further easing through 2017, but reducing the monthly stipend after March, we see the struggles within Europe.

Next week we have Janet Yellen and the Fed raising rates 25 bps, which could take some of the wind out of the markets, but the year-end window dressing for portfolio managers should stem the downward flow until early 2017. Just the same as last year’s market action.



Is it time to park your retirement fund?

What did Friday’s nearly 400 point cratering on the Dow and the huge move in treasury bonds tell us about the markets?

As I’ve written recently, September/October is the silly season for the markets. Volatility will ramp up, as it did yesterday by 45% from a historically low-level.

Friday morning pre-market I wrote of the September rate hike as being more about bailing out the derivative markets with special attention to the interest rate swap market.

There’s just no other reason for Janet Yellen of the Fed to be talking in unison on raising rates in two weeks.

The thought that the job market is doing well, based on Labor Dept. data appears to be challenged, since this week Labor revised down 150K jobs created.

The jobs revision did not take away the bartenders, waiters or healthcare workers, no the revision discounted manufacturing and other higher paying jobs.

On the inflation front there is absolutely no wage growth to create inflation. Retail prices as witnessed by any shopper are slashed by 40% in any clothing store window.

If wages are stagnant and prices are falling then you have inflation levels at less than 2 percent, well below the Fed’s desired threshold.

Forget how the US is doing because we are the proverbial cleanest dirty shirt in the pile, England and Europe are easing, Asia is easing and yet Yellen is talking of tightening.

It really doesn’t make sense from an economical view-point, but much of this last eight years has been problematic from a middle class perspective.

That’s why I raised the prospect of this being another back-door bailout for troubled financial institutions to bolstered crippled balance sheets.

This is the reason on Tuesday I parked my 401(k) funds into cash until I get some clarity on what will happen in Sept. through Nov. with the election.

Disclaimer: I did it, but you don’t have to, since I am not a financial adviser.