More and more corners of the financial markets are recognizing the poor underlying fundamentals that exist right now. With the Dow closing below 10,000 today, the red flags are going up all over the place.
Earlier today, the folks over at Yahoo Tech Ticker looked at the Hindenburg Omen – a technical indicator that has been roughly 25% accurate in predicting big market upheaval since 1987.
You can see the video and get the full details here.
The good news is that being right 25% of the time means that the Hindenburg Omen is wrong 75% of the time. The bad news is that there are a lot of reasons to be worried right now that have nothing to do with cleverly-named technical indicators. From the Tech Ticker report:
It’s the Economy, Stupid: This week’s weak durable goods and home sales reports are just the latest in a string of desultory data. In sum, the macroeconomic data strongly suggest the job market isn’t going to improve anytime soon. And if the job market doesn’t improve, there’s really not much hope for a turnaround in housing, consumer sales or anything else really. Oh, and the stock market is still expensive on a cyclically adjusted P/E basis, making it more vulnerable to an economic slowdown.
Unusual Uncertainty: On July 21, Fed chairman Ben Bernanke testified on Capitol Hill that the Fed’s forecast called for real GDP growth of 3%-3.5% for 2010 and 3.5%-4.5% in 2011 and 2012. Less than a month later, the Fed announced plans to buy Treasuries again (a.k.a. “QE2″) and, as The WSJ reported this week, there’s a tremendous amount of dissention within the Fed about the ‘right’ policy prescription.
Financial Follies: Whether it’s renewed concerns about Europe’s sovereign debt crisis, more U.S. bank closures or reports of commercial developers walking away from properties, it’s clear the problems in the financial system were not resolved by various and sundry bailouts and government stimulus … not by a long shot.
Good Politics vs. Good Economics: S&P’s downgrade of Ireland’s debt and Greece’s revenue shortfall show the short-term perils of the austerity measures that have swept Europe. But promising to cut government spending and slash deficits appears to be a winning political strategy in America right now. Certainly, it’s a key message of Republican and Tea Party candidates, who appear to have the momentum heading into the November mid-term elections. But if Europe’s ‘PIIGS’ are any example, gridlock might not be so “good” for the economy this time around, much less the financial markets.
If you’d like to get your money out of harm’s way and take firm control of your financial future, drop us a line or give us a call at Devers Financial Group. We’ll work together to make sure you’re not staring at your retirement fund statements someday and crying, “Oh, the humanity!”
