Dow, S&P 500 having worst month since 1931 as Grinch hits Wall St.
Next recession will be ‘much worse’ than the last: Euro Pacific Capital CEO
E-Valuator Funds’ Kevin Miller and Euro Pacific Capital CEO Peter Schiff on the recent market selloff, the Federal Reserve’s rate hikes, how investors should deal with market volatility.
The Grinch is making his way around Wall Street. The recent volatility has put the Dow Jones Industrial Average and the S&P 500 on pace for their worst months since 1931, as tracked by our partners at Dow Jones Market Data Group.
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The S&P 500, the broadest measure of stocks, has lost nearly 8 percent and the Dow Jones Industrial Average over 7 percent so far in December through Tuesday's close. While the economy isn’t facing 1931 challenges, which at the time was the Great Depression, headwinds are building.
“We are facing some speedbumps,” Michael Block, managing director and market strategist at Third Seven Advisors, tells FOX Business. “The economy is starting to slow, GDP is not the 3 to 4 percent we were promised,” he notes.
To Block’s point, the economy is expected to grow about 2.9 percent, as forecasted by the Federal Reserve Bank of Atlanta’s GDPNow, in the fourth quarter. That’s a drop from the robust 4.2 percent in the second quarter and 3.5 percent in the third. Block is also concerned favorable fiscal policy has petered out, as he noted in an open letter to President Trump. Trade spats also remain a worry.
Plus, more worrisome headlines are popping up. Dow transports component FedEx, a global economic barometer, cut its 2019 profit outlook late Tuesday. CEO Fred Smith said while the U.S. arm remains solid, “[the company’s] international business, especially in Europe weakened significantly” since September’s results. Case in point, Germany, Europe’s largest economy, contracted 0.2 percent in the third quarter and its stock market, the Dax 30, is now in a bear market, off 20 percent from its high.
While there are still bright spots in Trump’s economy, such as an unemployment rate at 3.7 percent, the lowest level since 1969, and more job openings than workers available to fill them, some investors don’t see the momentum for the economy continuing in 2019. “Recent client meetings indicate that many investors believe the US economy will enter a recession in 2020,” said Goldman Sachs in its US Weekly Kickstart note. “The market path in 2019 will depend on investor perception of the longevity of the current economic expansion,” the firm added.
As for the Nasdaq Composite, the younger cousin formed in 1971, it is off 7.5 percent, its worst month since 2002. But tech giants including Amazon, Netflix and Microsoft are among the stocks that will celebrate 2018 as the year of double-digit gains. “You gotta go where the growth is,” notes Block.
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