If you’ve been paying attention to the markets lately, you’ve probably noticed that the stock market isn’t doing very well. Jittery investors are aware that the current economic expansion has been going since January 2009, making it the third longest in U.S. history. History would also dictate that it’s got to stop sometime.[1]
The market hit all-time records in January 2018, with the Dow Jones Industrial Average over 26,500, prompting many pundits to talk of a stock market bubble.[2] It’s not surprising that the overweening confidence that has fueled markets the past few years is showing its age. Since the beginning of the year, the stock market has experienced extreme volatility, and the second quarter saw its worst start since the Great Depression.
Stock Market Performance by the Numbers
Here are a few key statistics that should paint an accurate picture of stock market volatility:
- The Dow is up 2.80 percent over the past five days but is down .17 percent over the past month, 4.46 percent over the past three months, and .27 percent since the start of the year—including the record-setting highs reached in February.[3]
- The S&P is up 2.73 percent over the past five days but is down 1.07 percent over the past month, 4.47 percent over the past three months, and .32 percent since the start of the year.[4]
- The Nasdaq 100 is up 3.44 percent over the past five days but is down 2.42 percent over the past month and .68 percent over the past three months. However, it’s up 4.98 percent since the start of the year.[5]
- The Stock Market saw its worst start to the second quarter on April 1 since 1929, the year of the Great Depression. On that day, the S&P fell 2.2 percent, a drop only surpassed on the first day of trading in the second quarter by the 2.5 percent decline that hit 89 years ago.[6]
What’s important to recall about the above statistics is not just that the numbers are exposing the flaws in this overvalued market, but also that the fall in April 1929 was merely a precursor to the global economic destruction that came later that year. For market bulls, any comparison with the market dynamics of the Great Depression should be quite sobering.
Economic Crisis
Equities markets are teetering on the brink of disaster. A trade war with China that would be extremely costly to the U.S. and the global economy is brewing. A rare and extremely negative inversion in the forward curve for interest rates appears to be underway.[7] All of this is on top of the fact that both the markets and the economic expansion area due for a correction. If you haven’t invested in precious metals yet—what are you waiting for?