Is the consumer truly in great shape? Retail stocks in the S&P SPDR Retail Index (XRT) suggest otherwise. The exchange-traded fund hit new 52-week lows below the levels that we witnessed in the August-September sell-off.
What’s more, we already know the recessionary struggles associated with manufacturers. Industrial production, which measures the amount of output from the manufacturing, mining, electric and gas industries, has fallen in nine of of the previous 10 months. There are few, if any, ways to put a positive spin on the declines in industrial production.
And then we have the Fed telling us that “global market risks have diminished.” Really? How much further does copper – the metal with a Ph.D. in economics – need to fall before global market risks reignite? The iPath Bloomberg Copper ETN (JJC) has not only broken below August and September lows, it might as well have fallen off a cliff.
Similarly, how much further does oil need to drop before oil producing exporters begin falling apart. The iShares Canada ETF (EWC) is still toiling near its 52-week depths.
No Virginia, global market risks have not diminished. For that matter, global economic deceleration is still the prevailing prognostication by the International Monetary Fund (IMF). China’s economic output is decelerating. Japan is already in recession. And European quantitative easing is not stimulating borrowing activity the way that it did in the U.S.
In the end, all we have is the collective hope of voting members in the Federal Open Market Committee (FOMC). Hope that economic improvement will overcome lofty valuations and a pullback in corporate borrowing.
Don’t get me wrong. Based on everything from “tax-loss harvesting” to “window dressing” to momentum investing, the S&P 500 SPDR Trust (SPY) may still represent the best diversified stock holding around. How long one should stick with those brass tacks, however, is another matter entirely.
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