Tuesday September 11, 2018
“Warning Signs Flashing Red!”
Gold started off the week little changed, continuing to consolidate around $1200. This leaves us a moment to loop back around and underscore an important item we have already shared with you.
But we think it is one that demands repeating.
Goldman Sachs’ bear market indicator for stocks is now at “levels which have historically preceded a bear market.” The firm’s Bull /Bear Market Risk Indicator is higher now than before the deadly 2000 and the 2007 stock market crashes. In fact, it’s at the highest level in a half century.
As we noted over the weekend, the indicator is based on five factors: unemployment, the yield curve, inflation, valuation, and growth momentum. While each of these indicators for determining the outlook for the stock market is important in its own right, Goldman Sachs has consolidated them, and having back-tested the relative importance of each as a forecasting tool since 1948, has weighted the importance of each in its risk indicator.
What this means for investors:
Goldman Sachs says that it Bull/Bear market indicator “is flashing red.” for stocks. Those words are hauntingly familiar, especially this week as we mark another anniversary of the 9/11 attacks on America. After that tragedy, CIA Director George Tenet testified that in the weeks before the attacks, “the system was blinking red.” Warnings that go unheeded do no one any good. This is already the longest bull market in stocks in history. Can it go on forever? No. As economist Herb Stein noted, “”If something cannot go on forever, it will stop.” And when it does, there will be carnage in the stock markets and gold will be the beneficiary as investors scramble for safety.
As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at 602-955-6500 or toll-free at 877-354-4040.