Washington, DC -- (ReleaseWire) -- 01/21/2016 --According to the Nielsen agency, President Obama's final State of the Union was watched by 31.3 million people, the lowest viewership since Nielsen began tracking the annual address in the 1990s. No wonder, there, since his message just doesn't track with the real experience of most American citizens. According to Obama, the economy is roaring, our enemies are being defeated, and the most serious problems he needs to address in his last year are global climate change and people saying mean things about and in Washington. He touts creating 14 million jobs in the last 70 months, ignoring the jobs that were lost or not created because of an increasingly anti-business philosophy that leads to draconian and random regulatory burdens in every industry. He speaks of lowering deficits but ignores the $7.6 trillion dollar increase in our national debt since he took office, a 77% increase and nearly $600 thousand dollars for every one of those 14 million jobs. The icing on the cake is that he said in the State of the Union that anyone who disagrees with his rosy view of the economy is "peddling fiction." Talk about the pot calling the kettle cast iron!
From the perspective of most Americans the fiction here is being peddled by the president. Median household income is down over 7% from 2007 levels, meaning that American families are worse off, on the whole. The money-printing policies of the Federal Reserve have disguised the basic fundamentals that should be driving markets and economic decisions, and the chickens are finally coming home to roost, as we can see by what has happened in the equity markets since the beginning of 2016, the worst start to a year we've ever seen.
As recently as a few months ago, so many investors, and even professional money managers, were still bullish on the markets. More and more are coming around to the old adage: If it walks like a bear and has claws like a bear, then it probably is a bear market. And you don't sit and wait to be attacked in that case... you back away quietly before running like hell. Some of the most iconic market callers around have started talking about this. George Soros, speaking at an economic forum in Sri Lanka last Thursday, addressed global markets including the United States, and said that investors needed to be cautious, concluding that 'I would say it amounts to a crisis which reminds me of 2008.'
Let's look at what has actually happened in the first few weeks of this year. The Dow is down over 8% year-to-date, the small-cap benchmark Russel 2000 index is down 11%, the NASDAQ 100 has lost 9%, and the S&P 500 shed 8%. Global markets on the whole have lost 20% since the record high of last June, unraveling half the rally since the low of September 2011. And this could just be the tip of the iceberg, as many experts are saying that the market could see a much deeper correction before we reach "fair" prices.
Bank of America recently issued a report asking how bad things could get, and concluding that they could get much, much worse. They outline five main areas of worry: slowing US and global economic growth (United States fourth quarter GDP is tracking 1% or less); the collapse in commodity and oil prices, which are down 42% year over year for the fourth quarter; renewed fears about China; heightened geopolitical tension in the Middle East and North Korea; and the first transition to Federal Reserve policy tightening after Yellen raised interest rates by 25 basis points in December.
The Federal Reserve has no dry powder left to address this crisis, either. Years of hiding the ameliorating the symptoms by printing money without treating the disease have left them with few options. Economic fundamentals are coming back into style, which is why we've seen this massive correction that began in December. The question is how we as investors should be reacting.
J.P. Morgan has the beginnings of an answer, I think. In a recent release discussing U.S. equities, they reversed an earlier position. In 2008, 2009, 2010 and even 2011, they advocated using dips as buying opportunities.. However, they are now saying that 'we believe the regime has transitioned to one of selling any rally. And, yes, stocks have had a rough time recently.' They clearly believe that equities won't keep falling in a straight line, but advise that rebounds should be used as an opportunity to sell.
Once we back away quietly from this bear market and run like hell, what next? Two possibilities are cash and gold, which is up 2.58% this year while all other asset classes have dropped precipitously. Cash doesn't correlate at all to risky assets, and gold historically correlates negatively, so they are strong options for your portfolio as this market continues to worsen.
It's no wonder that a record percentage of Americans now identify as neither Democrat or Republican in a recent Gallup poll. President Obama, Congress, the Federal Reserve, and all of their media mouthpieces continue trying to sell us a view of the economy that is provably false. We can see that our lives are not getting better, so why do they keep trying to convince us that they are? And now, the markets are finally coming to the same conclusion, so we need to be ready for the bear.
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.