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Ugly Stock Market

….It’s Terrifying Trump…

Trump terrified that he can no longer point to the stock market and brag how great he’s doing. The major indexes are down about 1% from year ago levels. And a closer examination shows the stock market is flashing a big red danger sign. A recession is upon us.

Four of the five sectors with gains, (Aerospace/Defense, Consumer Discretionary, Consumer Staples, Tech, and Telecommunication) have also been declining in the last five weeks.

Both the Transportation Index and the Russel Index of small company stocks are down 16% from year ago levels. And 2/3rds of the stock sectors indexes are showing losses. The Pharmaceutical, Energy, and Retail Sectors are showing declines exceeding 25%. Declines in Biotech and Banks are almost 20%. The Healthcare, Industrial, Materials, Telecommunications and Financial sectors are also down.

Utilities is the only sector that is doing well. This also points to an upcoming recession. People need utilities even in a recession. So when investors flock to this sector, it means investors are concerned.

If it wasn’t for the USA consumer on a spending spree, the recession would be deeper. Businesses have lost confidence and have reduced investments. Oversea countries, threatened and belittled by Trump, have also reduced buying USA products and services.

Trump knows he needs the USA consumer to keep spending until after the 2020 election or it’s all over for him. He keeps ordering the Federal Reserve to reduce interest rates to “juice” domestic consumer spending. In addition, he ordered his financial advisors to come up with other ways to pump up the economy. But with the budget deficit at $1 trillion per year and interest rates at historical lows, finding ways to counter the recession will not be easy.

Trump hopes he does not have to address the real problem facing the USA. Businesses have lost confidence in Trump’s policies. And other countries hate Trump and are “boycotting” the USA products and services. Lower interest rates will not do much to help restore confidence or have other countries buying our products again.

 

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