Recent Statistics Underscore Economic Recovery’s Weakness

Published August 8, 2016

William RutherfordThe gross domestic product numbers just posted show U.S economic growth at 1.2 percent for the second quarter of 2016, and when added to the numbers for the first quarter, they show anemic 0.9 percent growth for the year to date. Economists had expected 2.6 percent growth after seven years of slow to no growth; the U.S. now exhibits more of the same.

The U.S. economy has grown at a 2.1 percent annual rate since the recovery began in 2009. The current expansion remains smaller than the one during Richard Nixon’s administration, and that expansion lasted a mere three years. Even Janet Yellen, the Federal Reserve’s chairwoman, sees slow long-term growth.

During this “recovery,” 3.1 million more people fell into poverty, and the percentage of Americans in poverty climbed from 14.3 percent to 14.8 percent.

Sixty percent of households saw their income shrink between 2009 and 2014, while the bottom 20 percent saw their incomes decline by 8 percent over that time.

More people are on food stamps. According to the U.S. Department of Agriculture, 8.7 million more people were on food stamps in April than when the recovery started.

The number of […]

In The Aftermath Of Brexit Vote, Implications Are Staggering

Published July 11, 2016
William RutherfordVoters in the United Kingdom awoke with a bad hangover recently. They were dazed and angry, but mostly confused. The nation had just voted to leave the European Union. Millions of people signed a petition in protest. The opinion polls had said that after 43 years, Britain would vote to remain in the European Union. The markets were positioned for a vote to remain. But by a razor-thin margin, the voters said to leave. Some votes in favor of leaving may have been in protest, not expecting them to contribute to such a result. But there it was, for better or worse: Leave!

In rapid order, the prime minister offered his resignation to take effect in October, with an election to find a new leader. The person thought most likely to succeed was Boris Johnson, former Lord Mayor of London and a proponent of Britain leaving. But Johnson dropped out of the race when one of his best friends and supporters, Michael Grove, filed for the office. That prompted one member of Parliament to say that there had to be a special place in hell for Grove.

Johnson consulted other […]

Brexit Blues

William RutherfordBy now you are probably aware that the U.K. has voted to leave the European Union (EU). The vote came as a shock to the markets even as it was known that the margin go or remain was razor thin.

What began as an experiment after the Second World War has run aground in a very short time from a historical perspective. For centuries Europe has had a history of turmoil with major wars following about every fifty years. After World War I an attempt was made for a lasting peace with the League of Nations, but that did not last long. After the carnage of World War II, Konrad Adenauer and Charles DeGaulle set about avoiding yet another major war on the continent. If the countries of Europe could be united economically, it was reasoned, maybe they could avoid future wars. Beginning with small agreements, initially about coal, and later about tariffs in general, the seeds of the European Union were planted. Out of that initial effort came an economic union, a common currency and the ability to travel and ship goods freely throughout Europe. No longer were hours long waits […]

In 2016, May Wasn’t The Time To Sell And Go Away

Published June 13, 2016
William RutherfordLast month I asked a rhetorical question: Should we sell in May and go away as the old market saw suggests? I pointed out that what was once a predictable market event has shown, in recent years, to be unreliable.

This May turned out to be no exception, as the markets once again confounded the experts. If you sold in May, you left the party too soon. The Standard and Poor’s index rolled up a 1.53 percent gain in May – 1.8 percent with dividends reinvested. For the three months ending in May, the blue chip index was up 9.12 percent with dividends. The markets were expected to decline because the Federal Reserve was expected to raise rates in June or July.

Once again the Fed has egg on its face, as the most recent jobs report showed that only 38,000 jobs were created in May. The consensus forecast of economists was 160,000 new jobs. This was the worst job growth number in five years. Jobs growth for previous months was also revised downward. Even 160,000 new jobs is a paltry number, because the economy needs to create 250,000 jobs […]

This Month, The Market Could Go Anywhere

Published May 9, 2016

William RutherfordSell in May and go away. This mantra has been a market staple for years. It used to have a solid basis, but not so much anymore. For instance, the market has been up in May for three of the past five years, so what will this year bring?

This year a disappointing start was followed by a strong rally to get the market to essentially break even by March 11. The market as of May 3 is 3.2 percent off of its all-time highs reached on May 21, 2015, but doesn’t seem to be able to mount a breakout. Telecommunications and utilities have been the best performing sectors year to date, and health care and financials the worst.

Various headwinds have stalled the markets: This recovery is long in the tooth. It is the second longest bull market in U.S. history, surpassed only by the boom after World War II. From its low in March 2009, the recovery is now over 2,600 days old and counting. It has been a weak recovery with GDP recently barely growing more than 1 percent. Indeed, GDP growth was 0.5 percent in the […]

When All Seemed Lost, Yellen Rescued Markets

Published April 11, 2016

William RutherfordIn the fourth quarter of 2015, investors were losing confidence in the Federal Reserve. The Fed speakers were out on the rubber chicken circuit spouting all kinds of opinions. “More rate hikes” would say one Fed President, “no rate hikes” would say another, and so it went.

The markets were dizzy with the contradictions. The global economy was weak, with China particularly unnerving. The price of oil was declining, along with other commodities; loans to commodity producers looked risky; and the banks, once again, looked shaky. The dollar was strengthening on the belief that the Fed was about to raise rates again. Multinational companies and emerging markets were hit. The dark clouds were everywhere. Albert Edwards, global strategist for Societe Generale, warned that the U.S. market could fall 75 percent. The voices of other market bears grew louder.

Into this mix, stepped the Fed with a December rate hike, ill-timed and not well received. Because of all the Fed speaker chatter, the markets believed the Fed was about to raise rates again in January. Clearly the Fed and the markets were out of synch. Not surprisingly the market took a […]