Washington, DC -- (ReleaseWire) -- 03/10/2016 --As if relieved to be putting February, the fourth consecutive month with declining markets, in the rear view mirror, equities surged last week, even in the face of dismal macro-economic news. Why? It seems that the numbers were so bad that they led to speculation of further intervention by the Federal Reserve, and the very idea of more freshly-printed money drove the markets higher.
Let's look at some of those numbers that didn't get much play in the press last week. Manufacturing, for instance: the PMI, a measure of the health of the manufacturing sector, dropped to a cycle low of 51.3, from 52.5, with the employment component at five month lows. Production is at the slowest rate it's been in twenty eight months and work backlogs tumbled to the very lowest level since September of 2009. And ISM manufacturing hit, coming in at its weakest in seven years. It was only at 49.5, and has been in contraction for the last five months. That is the longest streak we've seen of this type of contraction since 2009. Aside from manufacturing, the jobs numbers from last week seemed shiny and bright on the surface—headline unemployment was at 4.9% for February, gaining 242,000 jobs—but if you take into account everyone that's out of work and wants to be working, the true rate is still about 22.8%, and annual payroll growth was at a 20 month low. First quarter real trade deficit continued to deteriorate, and construction spending has remained in a non-recovery mode.
Even former Federal Reserve Chairman Alan Greenspan surfaced last week, telling Bloomberg that he hasn't been optimistic about the U.S. economy for "quite a while," a sharp contrast to his relentless cheer-leading in the 1990s. He brought up government entitlements, which account for a larger and larger percentage of the GDP each year, crowding out capital investment. He described a negative feedback loop, where less capital investment leads to lower productivity, lower productivity leads to slower GDP growth, slower GDP growth leads to an economy that can't keep pace with entitlement programs, and so on, in a death spiral that leads to the sorts of manufacturing numbers we're seeing and a lower standard of living for the majority of Americans.
Another number might provide some insight into what might make sense as a response to this crazy, volatile market, and that number is 18.81 percent. That's how much gold is up this year against the dollar, versus the NASDAQ's -5.75%, or the S&P 500's -3.18, or the Russell 2000's -4.7%, or the Dow's -2.4%. Blackrock even suspended a gold ETF issuance last week due to surging demand for the metal, and many gold ETFs have seen the greatest inflow since early 2009, right after the Federal Reserve began their first round of quantitative easing. Greenspan himself said in a paper written in 1966 that "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process." Gold has, so far this year, been the strongest currency in the world, a sure sign that the central banks are losing their grip as fiat currencies are devalued over and over again.
This economic instability and uncertainty, the central banks' crumbling facades, the fact that the so-called "recovery" isn't being felt by real Americans, all of this is showing in the big political stories of last week. And I'm not talking about how big Donald Trump's… fingers are. Trump and Sanders both resonate on some level because of the economic populism they espouse. These two grumpy old men have found surprising traction with messages about inequality of wealth and the squeeze the current economy puts on the average Joe. And yet, the debates focus on anything but substantive policy discussions, becoming a circus that distracts rather than illuminates. Surely that is not what is best for any of us?
As we move farther into a 2016 which is becoming more difficult more quickly than I anticipated, consider the following. In bear markets, the strength is to the downside and the violence and volatility is to the upside. Weird counter-trend rallies like those we've seem in the last week and a half are painful, toying with your mind and making you feel you're missing something. Markets don't go up and down in straight lines, but I believe this bounce is over and we'll be seeing a series of lower lows and lower highs not just in the United States but around the world. This is not a market for everyone, and investors should seriously consider the options before deciding where to put their wealth.
For over a quarter century, the experienced advisers of Bennett Group Financial Services, LLC have been successfully guiding clients through the complexities of wealth management. Bennett Group Financial Services provides individual investors, corporations and foundations with holistic investment strategies using unique portfolio solutions across a breadth of asset classes. Our unique vision and insight into market trends makes Bennett Group Financial Services a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to our highly regarded weekly talk radio program - Financial Mythbusting. Through attentive service and prudent, thoughtful advice, Bennett Group Financial Services, LLC strives to consistently provide its clients with the highest quality of guidance and personalized service available.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
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