Washington D.C., DC -- (ReleaseWire) -- 10/21/2014 --Looking at the financial markets the week of October 6, 2014, all I could think about was bungee jumping. If you are an investor that wants to experience stepping off the edge of oblivion into thin air to get the rush of free-falling and then hopefully rebounding, all you need to do is stay invested in the U.S. stock market. These quantum bounces up and down, at least for the time being, are here to stay says Dawn Bennett, CEO of Bennett Group Financial Services in her latest warning to investors.
Last Wednesday, October 8 was 2014's best day for the Dow, and then it was immediately followed by its worst day on Thursday. Now, that is what I call stock market bungee jumping. Then the next day it all ended with the worst week in three years for stocks.
At the very minimum, U.S. investors have given back approximately $2.0 trillion in wealth in U.S. stocks in the past month or so, according to Wilshire and Associates. At this stage, with the adrenaline pumping nose dive experience continuing, I doubt any investors have the desire, or the stomach, to attempt dollar cost aver aging into the U.S. stock markets.
Nearly a quarter of the stocks in the S&P 500 have dropped more than 12 percent in the past 30 days, and that puts the S&P 500 index at an eight-week low. The Dow Jones Industrial average has dropped approximately -5.49 percent to 16,141.00 which means that the blue chips are negative for the year. The Dow transports are at a negative 6.9 percent for the week. That is a really bad index breakdown.
Most important to market technicians, they closed actually below their 200 moving-day average, which is not a good sign. The NASDAQ index for the week was down negative 4.4 percent, which was its worst week in 30 months.
So far the big story that I took away from last week is I think 2014 is going to be a year of underperformance, except for gold and silver. Gold this week was up positive 2.7 percent, which was the best week in six months, and silver was up 3.3 percent this week, which was the best week in four months. Yet, it's the underperforming areas that need concern, especially in portfolios.
Now Bill Gross, formerly of PIMCO now with Janus, said something very important about what's going on. It was fascinating coming from him. He said, "Growth in the U.S. and elsewhere has been facilitated in the past 30 years by the expansion of credit and leverage. Once capitalists recognize that they can't continue to accumulate leverage at the same pace, growth is actually going to slow."
What Gross is saying shouldn't be a surprise to anyone. The U.S. debt and unfunded liabilities have far exceeded its assets for quite a long time now. The rest of Europe is no better off than the U.S.
Bloomberg actually reported that the glory days of France's welfare model is actually going to be gone, as it hasn't had a balanced budget since 1974. Which means for the last 40 years, France has lived beyond its means, even Standard & Poor's cut France's credit outlook to negative, and that was due to concerns about the country’s struggling economic recovery.
The negative outlook for France's credit rating isn't necessarily an aberration in Europe. The IMF last week released a global economic forecast that said that 2014 global growt h rate is actually going to be down to unchanged from 2013 at 3.3 percent, which is one-tenth lower than its most recent 2014 forecast. So the IMF actually assigned this weaker "setback," to the economic activity in the advanced Western economies; the U.S., Europe and Japan, during the first half of 2014.
They’re actually now starting to be honest about it and it isn't just France's issues from last week. Europe's largest economy, Germany, came out with a run of really lousy economic numbers, from lower industrial production to poor exports, to much lower factory orders to even weaker business confidence. So, we have bad German economic figures, France grasping for air and, Italy, Greece, Cyprus and Spain all on economic life support.
Larry Fink, CEO of BlackRock, said in a "Financial Times" newspaper article on October 2nd, that the U.S. policy makers are at fault for pushing investors into riskier assets, which is the U.S. stock market. He went on to say, "You're hearing from banking sources, like the Federal Reserve, a narrative that there are bubbles out there. The reality, they're to blame," he said, "and they're not taking any responsibility for it, so you need to take responsibility for it."
Now this is the CEO from the world's largest asset manager, and he's telling investors to pay attention, to take notice that the asset bubbles in the market were artificially created by the Federal Reserve, and it's the investor’s job to make the decision to take care of yourself.
So, you either have to decide to go for the market ride and stay in, or take a defensive approach in your portfolio. If investors want to avoid underperformance and end up with positive returns for the year, go the defensive route. We've spent the last six years in the greatest credit expansion ever seen in the world. I don't think there's any other alternative.
All market data references are sourced to Bloomberg terminal database.
Bennett Group Financial Services LLC, based in Washington, D.C., is a comprehensive financial services firm committed to providing opportunities to clients’ as they seek long-term financial success. Its customized programs are designed with the potential to help grow, lower overall risk and conserve client assets by delivering a high level of personalized service and skill.
For more information, call 866-286-2268 or visit http://www.bennettgroupfinancial.com
Securities offered through Western International Securities Inc. (WIS), member FINRA/SIPC. BGFS and WIS are separate and unaffiliated entities.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program on 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 as well as take podcasts on the road and forums for interaction.
The show is a great complement to Dawn’s monthly investing seminars that take place at Tysons Corner in McLean, VA, where she discusses investing.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett or dbennett@bennettgroupfinancial.com