Global Deflation is Bad News for Equities, worldwide.
1) Falling Oil & Energy prices. The Thing That Runs the World is collapsing. Energy comprises 25% of the S&P 500. Plunging Oil and Gas prices is not Good News.
2) Worldwide Commodity prices are falling because of declining Manufacturing demand. Weak Global Demand is a harbinger of Deflation. Energy and Commodities in free-fall.
3) Falling Precious Metals prices, all the way back to late 2011. Another Market deflating.
4) The China Syndrome : The implosion of China’s Credit Bubble in both Stocks and Real Estate. China is taking the world down with it, including its Currency devaluation.
5) The Fed’ is tightening Monetary policy. The spigot is turned off. Don’t fight the Fed’.
6) The U.S High-Yield “ Junk “ Bond Market is collapsing in both price and liquidity. Just like in 2007, the Junk Bond Market was the first warning sign of trouble looming.
7) Slow U.S GDP Growth. 2% – 2.50% GDP is not worth the risk in Stocks. Bad Risk/Reward. The U.S. Economy has Jobs, but no Growth. A flat economy portends flat Stock Markets.
8) S&P earnings in decline. Down 4.7%, year-to-year, since 2015. How can Stocks go higher … when Earnings are declining ?
9) Dow Theory. A bona fide Dow Theory Sell Signal is in place. The Dow Transports are leading the way down, another sign of a weak economy : No one is shipping Goods when there is no Demand for them. Dow Theory is over 100 Years old and time-tested. Ignore History at your own Peril.
10) Overvalued Stocks. By many different Valuation Methodologies, Stocks are over-valued. Over-valuation leads to under-performance. Expect years of “ Regression to the Mean. ”