Index Markers May Hide Troubling Economic Signs

Index Markers

The president is out in front this week talking about the health of the economy.

“Stock Market is heading for one of the best months (June) in the history of our Country,” he tweeted yesterday. “Thank you, Mr. President!”

But is that the whole story?

Yes, the S&P and the Dow are high – but seeing those marks as indicative of underlying economic health may in the end be reductive.

MarketWatch’s Mark Decambre weighed in yesterday about some underlying signs that investors may be watching as they pump their money into alternatives like Bitcoin and gold.

First,. Decambre points to the transportation market, where the Dow Transportation Index has taken a hit, decreasing 1.5% Monday.

Decambre also cites parabolic gold as a warning sign:

“August gold, the most-active futures contract for the commodity, is on pace for its highest settlement since May 19 of 2013,” he writes. “Looked at another way, gold is up more than 20% from its low of $1,184 an ounce, put in on Aug. 16, according to FactSet data. To be sure, gold is responding to a combination of factors that have given it fresh life since languishing at around this time last year. The dollar has weakened helping to lift assets priced in the currency, making them more attractive to buyers using other monetary units. But a major catalyst has been global central banks which have signaled that easy-money policy is back in effect, driving debt yields, which move in the opposite direction of prices, to multiyear lows.”

Another mentioned concern is low bond yields – specifically, negative yielding debt.

“The total amount of debt with yields below zero earlier this month hit a record of $13 trillion,” Decambre reveals. “The ballooning value of subzero-yielding debt reflects how global bond markets continue to attract inflows from jittery investors who appear to be buying bonds in reaction to fears of a broad economic slowdown.”

This last point may be something on which budget hawks and globalists agree – that when you have too much unsustainable debt, something bad happens.

In particular, there is widespread concern about starting a trade war with the nation that holds enormous amounts of its purported enemy’s treasury bonds.

Also, as indicated, extreme bond activity can signal trouble with the markets – when investors move from equities to bonds, you can often suppose that many of them are skeptical about short-term growth, and when they move from bonds to gold and Bitcoin, you might suppose that they’re skeptical about the markets in general.

Nobody keeps money under a mattress anymore, but the parabolic rise of both gold and cryptocurrencies, along with these other warnings signs, represents a strong indicator for those who are paying attention.