Gold & Bonds: The Forest for the Trees
When investors focus on trees instead of forests, it provides opportunities to those of us who can keep the forest in focus, asserts Landon Whaley, editor of The Whaley Report.
Investors are now locking on to any suggestion that makes the U.S. economy appear healthy, and they are missing the recessionary forest, which is providing us with a huge opportunity in three markets.
The ISM Service PMI had the largest one-month increase ever; the trend in the ISM service index has been downward since it peaked in July 2015.
But it's not only the service trees decaying: industrial production has contracted for 12 straight months, which is the longest losing streak outside of a recession.
Factory orders have declined for 22 consecutive months, which is also the longest losing streak outside of a recession.
Commercial and industrial loan standards have tightened for four consecutive quarters, which, you guessed it, has never happened outside of a US recession.
If you need more evidence that we may run into problems on the way to Grandma's house, look at what's been happening with US growth forecasts. Both the IMF and the Fed have been slashing forecasts for US growth.
I've been saying on record since December that the Fed wouldn't raise rates this year, and would return to their easing ways by early 2017.
Treasuries, gold, and utilities have been crushed because investors are staring at trees and missing the forest. That recessionary forest has only one possible Fed response, and it isn't a rate hike.
If you want to avoid long woes and maximize returns between now and the ball drop on New Year's Eve, get long in the markets that have gotten you paid all year.