According to a venerable New York investment bank, Wall Street is “showing signs of exhaustion.”
Here’s the problem: there is little or nothing left to send stocks higher. There is simply no gas left in the tank, says Morgan Stanley research just released this week.
“The bottom line for us is that we think the selling has just begun and this correction will be biggest since the one we experienced in February,” the investment bank wrote to clients.
The decline “could very well have a greater negative impact on the average portfolio, especially if it’s centered on tech, consumer discretionary and small-caps,” said Morgan.
Many investors were caught off guard by this sharply negative report, when July was generally a good month for stocks.
“We must admit, the market sent some misleading signals over the last few weeks,” wrote the Morgan analysts. “We believe this simply led to an even greater false sense of security in the market,” said Michael Wilson, the firm’s chief U.S. equity strategist.
RESEARCH: AUGUST IS HISTORICALLY WEAK FOR STOCKS
According to the Stock Trader’s Almanac, August ranks as one of the weakest months of the year for major indexes. What is worse, stocks generally see steeper losses in midterm years, as the current one is.
Unfortunately, Morgan Stanley isn’t the only one worried about stocks.
John Hussman, of the Hussman Investment Trust, is known for his keen market perception. He successfully predicted the crashes of 2000 and 2008, saving the investors that listened millions.
What does he see ahead soon?
Over 50% drops. That includes the S&P 500, Nasdaq, Russell 2000 and Sow Jones Industrials. He believes the DJIA will be the hardest hit, with a total possible drop of as much as -69%.
Skeptics should consider that the S&P 500’s price/sales ratio, according to Hussman’s calculations, has increased from a multiple of 0.7 to 2.4 in 2018. That means stock prices are outstripping the companies’ abilities to keep up with increased sales and revenue.
More evidence is seen in investors’ appetite for risk, which Hussman says is getting lower and lower. He believes this is a clear sign of stock trouble ahead.
As we’ve said many times before, we aren’t market timers at the Hartford Gold Group. We’re just realists who want our portfolios to be protected from the inevitable crashes that hit our stock market.
Gold and silver clearly deserve your careful consideration at a time like this, when uncertainty seems to be the order of the day.
A FRENZY OF DEBT FOR THE U.S.A.
Remember the pain of the last financial crisis, and how a frenzy of debt drove our stock and housing markets right over the brink?
The suffering was tremendous and lasted for years.
Well, it seems that many Americans – and our elected officials – have already forgotten these searing lessons from the 2008 crash.
This week, U.S. Treasury Secretary Steven T. Mnuchin testified to Congress that the U.S.A. will need to borrow at a huge scale for the rest of 2018 and beyond.
How much? Over $300 billion in just the next three months alone! That’s the fourth highest 3rd quarter debt increase in our nation’s history.
But it gets worse. The Treasury expects to borrow another $440 billion from October to December. Secretary Mnuchin warns that this will be the most new debt we’ve added so fast since the 2008 crash.
Already, this borrowing is way ahead of previous estimates. “The estimates were quite a bit higher than our expectations,” said Thomas Simons, a senior economist at Jefferies.
Ahead looks even worse… the Congressional Budget Office expects spending to exceed revenue at a rate of over $1 trillion per year by 2020.
You heard it right… $1 trillion a year with no end in sight. Even the mighty American financial system can only take so much.
If you’ve been looking for a signal to get smart about your diversification, this is a clear warning to us all.
WHY DOES OUR NATION’S DEBT ONLY SEEM TO SPIRAL UP AND UP?
Anyone can see the terrible financial consequences that are coming down the road. In addition, with each passing month, we become more indebted to other nations who can use that debt as powerful leverage against our interests.
This is a sobering and frustrating thought for anyone who works hard at being responsible about their own family’s finances. We all know how easily debt can spiral completely out of control, especially when there is a sudden loss of income.
This is exactly where our nation is now. We’re adding debt fast while our income is about to drop!
According to Secretary Mnuchin himself, the nation’s fiscal health is deteriorating rapidly even as the economy seems strong. At the same time, our needs for spending are increasing fast.
That is a recipe for a collapse in confidence in American credit worthiness. This could deal a hammer blow to every American’s retirement plan.
You and I know how to make tough decisions and sacrifices to make ends meet – it is just the responsible thing to do. I just wish our elected officials shared the same kind of simple common sense.
This is why it pays to consider the role safe haven assets like gold and silver can have in protecting your hard-earned wealth. Have you thought about what gold and silver, in your home safe and/or in a Gold IRA, could do for your peace of mind?
Any student of the market learns this rule first: what comes up, must come down. Balancing stocks and bonds with safe haven assets is something everyone should consider… right now.