Stock market hostilities won't subside until central governance stops throwing money around and starts fixing the Market’s problems. President Obama’s speech today was another desperate plea for more money; and he’s looking more like a subprime mortgage borrower did during the housing collapse – please, please, just one more re-finance – than a chief executive officer. And it’s hurting the Market.
So far this year the Dow Jones Industrial Average is down 5.5% (indicating recession once again) and the 15-51 Indicator is up just 4% (well off its 18% per year historical average.) See the chart below.
Often times “uncertainty” gets the blame for stock market volatility. But uncertainty always surrounds the stock market. Mixed signals are part of reality – and provide the room and fuel for speculation. Check out these Wall Street Journal headlines from today:
U.S. Stocks Lose Steam (and the Dow ended up the past few days)
September Retail Sales Are Solid Ahead of Holiday Push
Since no one knows exactly what will happen and when, uncertainty is omnipresent. Mixed signals are part of the game. Always.
So what’s driving the Dow down as illustrated in the above chart?
Incompetent central governance. It’s not fixing problems like it should be (see my blog series: Fixing the Market for more details). Instead it’s playing shell games with money and manipulating GDP with reckless government spending. The only thing that’s doing is driving up national debt and depreciating the dollar. More of it, like President Obama’s new jobs bill proposal, will only continue those negative trends.
What makes the matter even more daunting is when other countries follow our irresponsible lead, as can be seen in this WSJ headline:
Bank of England Expands Quantative Easing
This is all bad for money and markets. That’s why the above chart looks like it does. And it’s also the reason for gold’s torrid run since the housing bust.