KITCO NEWS/Neils Christensen

Gold prices see small jump following dire U.S. retail sales numbers

March 17, 2020

“The gold market found a little short-term momentum Tuesday after data showed a sharp drop in consumer activity last month. U.S. retail sales fell 0.5% in February following January’s revised rise of 0.6%, according to the latest data from the U.S. Commerce Department; the data significantly missed expectations as consensus forecasts were calling for a 0.2% rise Meanwhile, core sales, which strips out vehicle sales fell 0.4% last month, following January’s revised increase of 0.4%.

The control group, which excludes autos, gas, building materials, food services and directly feeds into GDP calculations, was unchanged in February, up from January’s revised increase of 0.4%. Economists were expecting a 0.4% increase. In initial reaction to the latest economic data, gold prices have risen from their session lows; however, the market is still in negative territory. April gold futures last traded at $1,485.50 an ounce, down 0.07% on the day. Some economists have noted that the stronger revision in January’s data is taking some of the sting out of February’s declines but also note that this does not bode well for future spending. ‘The retrenchment in US consumer spending started a month earlier than the consensus expected,’ said Andrew Grantham, economist at CIBC.”

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BLOOMBERG/ Christopher Condon and Jeff Kearns

Morgan Stanley, Goldman Declare Global Recession Under Way

March 17, 2020

Global Easing in 2020Goldman Sachs Group Inc. and Morgan Stanley economists joined the rush on Wall Street to declare that the coronavirus has triggered a global recession, with the debate now focusing on its likely length and depth. A day after President Donald Trump conceded the U.S. slump alone is set to be ‘a bad one,’ economists threw away their forecasts that the world could avoid tumbling into recession for the first time since the financial crisis.

Behind the rethink: The virus’s spread to Europe and the U.S., as well as new evidence that China — the first to be hit by what is now a pandemic — experienced a harder hit to its economy than originally projected. Morgan Stanley’s team, led by Chetan Ahya, said a worldwide recession is now its ‘base case,’ with growth expected to fall to 0.9% this year. At Goldman Sachs, Jan Hatzius and colleagues predict a weakening of growth to 1.25%. S&P Global added its voice to the chorus with a report expecting that growth would range 1% to 1.5%.”

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CNN BUSINESS/Julia Horowitz

This market crash is even crazier than 1929

March 17, 2020

Stock Market Volatility has Hit an All Time High“Monday was the worst day for US stocks since 1987’s ‘Black Monday’ — and there’s no real recovery in sight. What happened: The Dow fell 12.9% as fear about the coronavirus pandemic and the ensuing global recession escalated, wiping out three years of gains. The S&P 500 dropped 12%. The VIX, a gauge of stock market volatility, spiked 43% to 82.69 as coronavirus fears ripped through Wall Street. That takes out the previous record set in 2008. It’s the VIX’s fastest spike since the 1987 crash, according to Bram Kaplan, executive director of equity derivates strategy at JPMorgan.

‘The Covid-19 pandemic sparked the fastest reassessment of equity market fundamentals and risk in the last 30 years,’ Kaplan told clients. The S&P 500 recorded its quickest bear market ever, falling 20% from its peak in just 15 trading days. That’s twice as fast as the next quickest meltdown. That was in 1929, and it took 30 trading days. Kaplan notes that open orders for S&P 500 futures have plunged about 90% to record lows. Investors have woken up to the fact that the world is entering a sharp recession as curfews and lockdowns ripple across the United States and Europe. The question now is just how bad the economic contraction will be. ‘Whereas 10 days ago there was some legitimate uncertainty about whether the global economy was in the process of going into recession — 10 days later, there’s no question that it is,’ David Wilcox, former head of research and statistics at the Federal Reserve Board, told me.”

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MARKET WATCH/Barbara Kollmeyer

Top forecaster who exited stocks predicts ‘rolling bear markets’ until 2022

March 17, 2020

picture of subway entrance“After another worst-session since 1987 for the Dow industrials complete with 3,000-point drop, some green has been lighting up the screens this morning Behind that are high investor hopes that governments are going to throw the kitchen sink at the novel coronavirus, with the U.S. expected to roll out a big stimulus package. Regardless, most expect wild market swings will be with us for a while. ‘One essential 2008 comparison we tend to overlook was that during the Lehman crash outside the financial sector, life went on. In essence, restaurants took bookings; taxis took rides, shops were still bustling. This time around, the entire world is on the precipice of shutting down.

Our forecaster escaped this bear market by exiting 90% of stocks before the virus started to grip the world. He warned months prior of too much optimism for equities. Yves Lamoureux, the president of macroeconomic research firm Lamoureux & Co. who correctly predicted a panic event of 2018, now sees a series of rolling bear markets ahead. He started talking about what he calls a Global Financial Crisis 2.0 as early as late October 2019, then began selling stocks in December, leaving him with just a ‘few good ideas,’ by late January. ‘I think after 10 years of being on steroids, I’d say this market is very fragile. I was looking for something to turn the bull market out. The virus was the needle that pricked the bubble,’ says Lamoureux.”

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FORTUNE/Bill George

The next Great Recession has already begun

March 16, 2020

empty store shelves“Remember the 2008 financial crisis? Well, the next Great Recession began this past week, as the U.S. virtually shut down its economy to prevent further spread of COVID-19.  First, the NBA suspended its season, followed in rapid succession by the NHL, the MLS, the MLB, and most recently, the PGA’s cancellation of the 2020 Masters golf tournament. Then Broadway closed down, followed by cancellations at nearly all major venues. Businesses told their employees to work from home. In Minneapolis, the normally-packed Mall of America parking garages are virtually empty. In New York City, Mayor Bill de Blasio just limited all restaurants, cafes, and bars, to takeout and delivery.

President Donald Trump’s Friday declaration of a national emergency seemed almost anti-climactic. Meanwhile, stock exchanges have been indicating a coming recession for two weeks, as stock prices have gyrated wildly, falling 20% until a partial recovery on the heels of the President’s announcement, according to analysis of data for the Dow Jones Industrial Average on Yahoo Finance. After the Federal Reserve’s emergency cut on Tuesday of 50 basis points, or half a percentage point, of interest rates failed to stem declining equity prices, the Fed followed with another cut on Sunday evening. This time it lowered rates to 0% (an additional 100 basis points), alongside pumping $700 billion of liquidity into the economy. In spite of those dramatic moves, the stock market plunged further on Monday as investors questioned whether further rate cuts will stimulate people to buy new homes or automobiles, or companies to increase their capital spending. Who would possibly be signing off on new capital investments right now?”

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How Bad Could Markets Get? History Says Much Worse

March 17, 2020

Years of Solitude“The past few weeks may have felt like a market apocalypse, but the lesson of past downturns is that this could get a whole lot worse. Think about the fall in terms of the number of years of gains given back, and this would be the briefest period of loss of any recession since the 1960s. This bear market is already deep and was quick to take hold, but hasn’t gone on for long. A recession now looks inevitable. The worst-case from past precedents would be a repeat of 2009, 1974, 1920 or the Great Depression, in all of which investors gave back more than a decade of stock price appreciation, counting dividends and inflation.

Caution is warranted in applying the lessons from the past. There are parallels to the global financial crisis, the Arab oil embargo or World War I. But the comparisons are very far from perfect, even though the war coincided with Spanish influenza, a devastating pandemic. The S&P has lost 29.5% from last month’s peak so far, one of the fastest falls into a bear market in history … The similarities to the worst cases of the past are both worrisome and reassuring. Stocks this time ignored a weak economy and geopolitical troubles. They did the same during the bull run from the aftermath of the panic of 1907 until they fell back to the same level in 1920. The 1974 oil crisis had an opposite move in the oil price to the recent fall. But it provided the supply shock that this time is resulting instead from the coronavirus-induced shutdown of business.”

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60 Years Experience