Washington, DC -- (ReleaseWire) -- 02/25/2016 --Last week's three day rally in the stock market raised choruses of hallelujahs from the media, with many talking heads and outlets declaring that the market had found bottom and things would be coming up roses from here on out. The question uppermost on everyone's mind was whether we're in the midst of a buying opportunity destined to give us meteoric stock returns, or whether this is another head fake. To take a chance, I will say that this rally looks like a head fake to me, a manufactured upswing that will lure many unwary investors into further investment in a dangerous market that looks much more like a bear than a bull, if you apply a true critical lens.
Since 2009, investors have been conditioned by a constant drumbeat of media headlines and statements from the government and the Federal reserve. 'We're in a booming market! The possibilities are endless! Jump in, the water's warm!' Trading algorithms and traders follow these headlines, reinforcing and bolstering their effects on the market, creating artificial volatility on both the up- and the downside. I've been saying for years that it's time for all of us to get underneath the headlines, do research, think for ourselves, and then make the right decisions to protect our life savings and our financial future. That is more important every day.
More and more voices are daring to stop singing the central banks' chorus. Joseph LaVorgna is the Chief U.S. Economist for Deutsche Bank Securities, and for years he's been all-in on the bull train, but even he has started admitting that things might not be so great. He recently allowed that with an economy growing as feebly as ours has, for as long as ours has during this business cycle, we are more vulnerable to negative shocks and their impact on the markets. Larry Summers, an economist and former Treasury Secretary, spoke to the Washington Post last week. He puts the chances of recession at 33 percent, and goes further to say that things could get worse if we go to negative interest rates. The Fed has usually responded to signs of recession with rate cuts of as much as 400 basis points, but that tool simply isn't in their kit any longer. In an article entitled "Why It's August 2008 All Over Again for the Stock Market," analyst Ken Goldberg, looking at the wide Russell 3000 index since the May 2015 highs, concludes that right now very few data points support buying, but many suggest that selling actions are indicated.
Even with this most recent rally, I think investors should approach this as a stealth bear market. If the global and U.S. economies were growing steadily, if demand for goods was high, if companies had strong revenues and earnings, we wouldn't be seeing this kind of volatility. Instead, the economy at home and abroad is lagging, and according to FactSet, a supplier of market data and economic information to investment management groups and investment managers in the banking industry, in the fourth quarter, S&P 500 operating earnings were down 3.7 percent and revenues were down 3.5 percent year over year. As a result, we have a rollercoaster, with the fundamentals struggling with hack-created headlines and creating immense risk and volatility.
I believe, as I have for years, that it is time for defensive, conservative strategies. Do not allow the pundits, central banks, or government suits dictate your actions. Think strongly about selling on rallies and really critically examine the urge to buy on dips. Consider cash, consider gold. But most of all, consider what your own intelligence, research, and guts tell you to do.
For over a quarter century, the experienced advisors 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 http://www.financialmythbusting.com.
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.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.