There has Never Been a Boom, w/o a Bust
$DIA, $SPY, $QQQ, $VXX
Wednesday, we will get the FOMC policy decision at 2:00p, then Fed Chairwoman Janet Yellen’s Quarterly press conference at 2:30p EDT
Despite limited expectations, the US Fed’s economic outlook for the rest of Y 2016 and as reflected in its expected path of the funds rate that will be illustrated in the updated “dots” plot could be useful for investors as well as for traders this Summer.
Last week Ms. Yellen said: “The recovery has not always been smooth, but overall, the gains have been impressive. In particular, the job market has strengthened substantially, and I believe we are now close to eliminating the slack that has weighed on the labor market since the recession … The current actual value of the federal funds rate, also measured in real terms, is even lower, somewhere around minus 1%… I continue to believe that it will be appropriate to gradually reduce the degree of monetary policy accommodation.”
So, with that raising the fed-funds rate this week would be a surprise, but September and November are possible dates for a rate hike, especially September when we’ll have got 3 more labor reports on the state of the US economy.
Investors should not forget that in December 2015 Ms. Yellen testifying before the Congress’ Joint Economic Committee said, “To simply provide jobs for those who are newly entering the labor force probably requires under 100,000 jobs per month, with anything above that helping absorb those who are unemployed, discouraged or had dropped out of the labor market.”
The latest disappointing NFPs (non-farm payrolls) data for the month of May shows an annual growth rate of close to 140,000. And, for all investors in the world, the UK’s EU referendum on 23 June make them very nervous.
Monday was a risk-off in equity markets everywhere and Red was the color of the day.
Overnight from China, we got some Key data, none controversial. Retail sales and industrial production are both in line with expectations.
For investors who have investing interests in China are the remarks of the IMF’s 1st deputy Managing Director David Lipton, who stated at a conference in China that, “Mounting corporate debt is a key fault line in the Chinese economy … Corporate debt remains a serious-and growing-problem that must be addressed immediately and with a commitment to serious reforms.”
Mr. Lipton added: “The past year’s credit boom is just extending the problem … Already many SOEs are essentially on life support.”
And in closing, “there has never been a boom without a bust. It is not a question of if, but when.”
** The boom and bust cycle is a process of economic expansion and contraction that occurs repeatedly. The boom and bust cycle is a key characteristic of today’s capitalist economies. During the boom the economy grows, jobs are plentiful and the market brings high returns to investors. In the subsequent bust the economy shrinks, people lose their jobs and investors lose money. Boom-bust cycles last for varying lengths of time; they also vary in severity.
Monday, the US major stock market indexes finished at: DJIA -132.86 at 17732.48, NAS Comp -46.11 at 4848.44, S&P 500-17.01 at 2079.06
Volume: trade was light with less than 84-M/shares exchanged on the NYSE
- Russell 2000: +1.9% YTD
- DJIA +1.8% YTD
- S&P 500 +1.7% YTD
- NAS Comp -3.2% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Neutral (0.07)||Neutral (-0.03)||Neutral (-0.15)||Bullish (0.38)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Neutral (-0.01)||Neutral (-0.09)||Neutral (-0.23)||Bullish (0.29)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Neutral (0.10)||Bullish (0.30)||Neutral (-0.15)||Neutral (0.14)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Neutral (0.08)||Neutral (0.11)||Neutral (0.11)||Neutral (0.00)|