An eye-opening article in Thursday’s USA Today reads like a grim warning about where the stock market is heading. One of many frightening observations: “2016 has been awful so far, with the Dow Jones industrial average logging its worst three-day stretch in a new year since the financial-crisis days of 2008.” Investors are now beginning to dump stocks fast in an attempt to save their skins in an increasingly uncontrollable world economy.
Look to China for the cause of all the tumult. According to David Kelly, chief global strategist at JP Morgan funds, “this is very much August all over again …the problem is no one knows where the bottom is for Chinese stocks or for (its currency) the yuan.” As the second-largest economy in the world, China had seemed to explode initially with a voracious consumption of commodities. But now that spending has receded, and nations that profited by imports to China are feeling the drop in business.
CNN reports that investors panicked when they read a private report showing that, contrary to government reports, China’s economy in fact contracted this past December. The Shanghai Composite tanked almost seven percent, and the worldwide domino effect drove the Dow below seventeen thousand for the first time since October.
I’ve suggested many times that, with regard to stocks, the party will soon be over. If you need a specific time and date, let’s just say the punch bowl is empty and the other guests are running screaming for the exits. Are you one of the stragglers still holding on to paper that’s losing value by the minute? The S&P 500 is currently trading over eighteen times trailing profits. According to FactSet Research, this figure is conspicuously above a five-year average. And as CNN points out, “Corporate profits continue to be dented by the strong U.S. dollar, sluggish global growth and the crash in oil prices. Analysts say S&P 500 companies in the fourth quarter suffered their first back-to-back decline in earnings since 2009.”
Meanwhile gold shot up fifteen dollars at yesterday’s close, catapulting the yellow metal to $1,109. Obviously at least some investors have chosen not to go down with the ship.
As I discussed yesterday, experts have already said it’s time to give up on the paper chase and move funds over to physical gold, Let others worry about China – the nation the CNN Money calls the “biggest influence” on Wall Street. You literally can’t do anything about that nation’s ills and the ripple effect of its plunging stocks and desperate currency manipulations. But you can protect yourself, and your future, against economic conditions which could easily become Great Recession II by moving whatever funds you don’t want to sacrifice into the time-tested safe haven of physical gold.