Monthly Archives: March 2016

Is this a set up for ‘sell in May and go away’?

There is considerable evidence for the old Wall Street adage ‘sell in May and go away’. It is well documented that ‘the Dow Jones Industrial Average has had an average gain of 7.5% during the November through April period and a gain of only 0.3% over the May through October period, going back to 1950’.

On the basis of current threats to the world economy investors should be aware of this effect since it seems that a number of elements are now assembled which pose potential threats to the world economy. These include:

  • Continued and expanding conflict in the Middle East region
  • An unstable economy in the European Union heightened by the refugee crisis
  • Continued weakening of the world economy with the threat of deflation
  • A slowing and indebted Chinese economy with manufacturing in decline and a weakening currency
  • Indecision by the US Federal Reserve

Of these factors, the continuing… Continue reading

China’s debt is now alarming

China is now a real concern for investors. Its exports contracted sharply in February, falling 20% from a year earlier, which represents a 6% contraction the previous month. China’s economy is now showing its slowest rate of growth in 25 years.

The concern over China’s slowing growth has caused volatile trading in international stocks, commodities and currencies in recent months. But it is China’s debts which must now be of particular concern. At the end of 2015 China’s total debt reached about 240% of GDP. Private debt was 200% of GDP which is close to Japan’s debt, in 1991 when the ongoing recession started in that country. The question is when and how will China reduce its massive debt?

The process of deleveraging will be both painful and damaging, not only in China but for the rest of the world. Most of this massive Chinese debt has accumulated since 2008,… Continue reading

Uncertain Times

These are uncertain times in the markets and there is no way to know where this bear market may end. Could this be a repeat of 2008 where the market lost 50% of its value? In fact, Elliot Wave analysis suggests that this current bear market is only in its early stages and there are many signs from the world economy to support this. The world economy continues to slow, equity markets are falling, economies are stagnating and consumer confidence continues to fall. The important factors behind the continued weakening of the world economy include:

 
• Lack of confidence in China’s financial system, its high levels of debt and the Yuan.
• Continuing destabilization in the Arabian Peninsula
• The continued action of central banks leading to high sovereign debt situations and surplus credit
• Issues within the European Union including the refugee crisis
• The very weak prices… Continue reading

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