Fully Stuffed Friday – Markets Popping Or Dropping?

What an interesting year it has been.

On the whole, the markets have gone nowhere and it’s up to December to either make or break a positive close for 2015.  As you can see from Dave Fry’s S&P 500 Chart, we had a big “W” pattern that seems to be leading into an “M” pattern that, on the whole will drag us back down to about 2,000 at some point.

That point, however, plus or minus 2 weeks, will make or break the markets in 2016. Brokers need to have a good finish to 2015 or their brochures for 2016 investing won’t look attractive enough to get customers to pull their cash off the sidelines – especially in a rising rate environment. At the moment it’s “sure bonds were only good for 3% last year but stocks were down” – that’s NOT a good way to get baby boomers to cash in their bonds and open a new trading account, is it?  

And Americans are saving.  After all – it’s a Recession. Just because the Government doesn’t want to call it a recession and the Corporate Media isn’t even allowed to say the word – it doesn’t mean it isn’t happening and the consumer spending data clearly indicates recessionary behavior has certainly taken hold.

Very sadly, looking at this BLS chart of Consumer Spending, the average family spends more after-tax money than they earn and that really doesn’t leave a lot of growth for economic expansion in a country where nearly 70% of our GDP is consumer spending. Savings is not even a category on this chart – for goodness sakes!  

As we know, less money has gone to gasoline this year and it was hoped that the savings would flow to other spending but that has not been the case as the average 48 year-old consumer is, of course, a little concerned with all this campaign talk about cutting the Social Security checks they expect to begin collecting in 17 years.  

I know this may come as a shock to 9 out of 10 “experts” they trot out on TV to explain things to you but, when you don’t raise salaries, then all the consumer can do is spend less of one thing and more of another and, when they are FORCED to spend more money on something like Drugs, Health Care, Education, Utilities, Fuel – then they are forced to cut spending somewhere else.