Money and Markets - Financial Advice | Financial Investment Newsletter
Skip to content
  • Home
  • Experts
    • Martin D. Weiss, Ph.D.
    • Mike Burnick
    • Sean Brodrick
    • JR Crooks
    • Larry Edelson
    • Bill Hall
    • Mike Larson
    • Jon Markman
    • Mandeep Rai
    • Tony Sagami
    • Grant Wasylik
    • Guest Contributors
      • Amber Dakar
      • Peter Schiff
      • John Sheely
      • Claus Vogt
  • Blog
  • Resources
    • FAQ
    • Personal Finance Corner
      • Hot Tips
      • Investments
      • Money & Banking
      • Consumer Loans
      • College Savings
      • Retirement
      • Credit & Debt
      • Taxes
      • Insurance
      • Life & Home
      • Investment Portfolios
    • Links
  • Services
    • Premium Membership Services 
      • Money and Markets Inner Circle
    • Trading Services
      • Marijuana Millionaire
      • Tech Trend Trader
      • Calendar Profits Trader
      • E-Wave Trader
      • Money and Markets’ Natural Resource Investor
      • Money and Markets’ Natural Resource Options Alerts
      • Supercycle Investor
      • Wall Street Front Runner
      • Pivotal Point Trader
    • Investment Newsletters
      • Real Wealth Report
      • Safe Money
      • Disruptors and Dominators
      • The Power Elite
    • Books
      • The Ultimate Depression Survival Guide
      • Investing Without Fear
      • The Standard & Poor’s Guide for the New Investor
      • The Ultimate Safe Money Guide
    • Public Service
  • Media
    • Press Releases
    • Money and Markets in the News
    • Media Archive
  • Issues
    • 2017 Issues
    • 2016 Issues
    • 2015 Issues
    • 2014 Issues
    • 2013 Issues
    • 2012 Issues
    • 2011 Issues
    • 2010 Issues
    • 2009 Issues
    • 2008 Issues
    • 2007 Issues
  • Subscriber Login
  • Weiss Education

Money and Markets: Investing Insights

Stocks’ sweet spot could turn sour without growth

Bill Hall | Wednesday, May 28, 2014 at 7:30 am

Bill Hall

In recent Money and Markets columns, I have been saying that we are in the sweet spot for U.S. stocks and investors should consider pursuing a “risk on regardless” strategy in their portfolios.

Indeed, U.S. stocks, as measured by the S&P 500, gained 32 percent in 2013 and are up about 4 percent so far this year, propped up mainly because of the Federal Reserve’s and European Central Bank’s easy-money policies. In fact, the S&P 500 hit a record high this past Friday.

And for further evidence of speculative financial market activity, look at the chart below that shows that stock market indices in certain emerging markets are again peaking, specifically the so-called Fragile Five: Brazil, South Africa, Indonesia, India and Turkey.


Click for larger version

Remember that it was just a few months ago that the Fragile Five were rumored to be the pin that would ultimately burst the stock market’s bubble. But with Fed Chair Janet Yellen and her counterpart at the ECB, Mario Draghi, both singing the same song — about a continued focus on promoting global growth — Wall Street quickly put its Fragile Five concerns in the rear view mirror.

And that’s what has been causing the recent rise in stock markets around the world.

It’s because investors trust that the central banks will prevent stocks from falling since that’s what has happened over the past five years. Thus, it’s become a commonly accepted belief that the central banks will support stocks no matter what the circumstances.

Collective belief can create its own reality, meaning that investors believe that stocks will go up so they do indeed go up, which becomes a self-fulfilling prophecy causing stock prices to rise.

That’s why the Fed and the ECB easy-money polices have really been just a confidence game. They are not based on any financial principle other than to make investors uncomfortable storing cash in Treasury bills, CDs and money-market accounts. In fact, the central bankers’ experimental policies — such as QE — have no theoretically valid or empirically supported transmission mechanism to the real economy at all.

But there is no denying that the impact of QE on investors has been quite real, even if it will ultimately be futile and destructive.

And recently I am beginning to see evidence that QE is a concept that is mostly played out.

In last week’s Money and Markets column, I said for stocks to go higher and a global economy plagued by excessive debt to make real advances, the world needs economic growth. That’s because growth is the magic elixir that cures all economic ills and propels financial markets higher.

Unfortunately, growth continues to be hard to find. As evidence, take a look at Wal-Mart Stores’ (WMT), Macy’s and Target’s disappointing recent earnings announcements. These retail giants are a barometer for the U.S. economy as a whole. Their entire organizations are focused on nothing but selling goods and services to the consumer, and they are all struggling.

From where I sit, it appears as if we are at an economic crossroads. The world and the global stock markets need growth to get going again. I am concerned that without growth we’ll fall out of the economic sweet spot for investors and into a deflationary environment with low growth that will be bad for stocks as shown in the chart below.

 

Click for larger version

That’s why my view has changed from “risk on regardless” to “it’s not a time to be filling up your boots with risk.”

The next couple of weeks are going to be interesting. Stay tuned!

Best wishes,

Bill Hall

P.S. Click here to discover the four surprising secrets the world’s wealthiest families use to grow richer … And USE them to grow your wealth in record time!

Bill HallBill Hall is the editor of the Safe Money Report. He is a Certified Public Accountant (CPA), Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP). Besides his editorial duties with Weiss Research, Bill is the managing director of Plimsoll Mark Capital, a firm that provides financial, tax and investment advice to wealthy families all over the world.

Previous post: Congrats grads! That’ll be $29,400

Next post: Volume deficit disorder: A trend in your favor

  • Sign Up Free

    To receive editorial updates from The Weiss Center for Investor Advancement and Money and Markets, type in your email address. We respect your privacy

  • About Us
  • FAQ
  • Legal
  • Privacy
  • Whitelist
  • Advertising
  • Contact Us
  • ©2025 Money and Markets - Financial Advice | Financial Investment Newsletter.
Weiss Research
Weiss Research, Inc., founded in 1971, has a long history of providing research and analysis designed to empower investors with information and tools to make more informed, independent decisions along with an equally long history of public service. [More »]