And, the stock market — using the Dow Industrials — fails to make new highs.
The U.S. economy grew at its slowest pace in two years the first quarter 2016, with GDP rising .5 percent, less than half the gain posted fourth quarter 2015. For some time, the U.S. was the shining star among world economies, but now that star is starting to dim.
The weakening U.S. economy did not go unnoticed by Fed chair Janet Yellen when she commented on no additional rate hike in March. And, further she noted the importance that the U.S. economy plays in the world’s economic scheme.
However, analysts speculate that she left the door open for two rate hikes this year. Fed rate increases “later in the year” has been a common thought of Fed lovers and economists who believe that “the economy can be managed.”
In the face of this slowdown, gold and silver are enjoying their best price increases in years while stocks are failing to punch out new highs. Why?
Gold and silver investors see that loose money has become the “go to” tool for attacking economic slowdowns. Keynesianism thinking dominates today’s world, and no one loves loose money more than Keynesians. Gold and silver investors know that loose money has always meant higher gold and silver prices.
However, loose money does not necessarily mean higher stock prices. Stock investors like to see corporate profits increase and dividend increases before adding to their portfolios. Still, there is a strong correlation to the Fed’s balance sheet (which increases with the creation of digital dollars) and stock prices. It’s just that stock investors want to be confident that the economy does not tank before the Fed returns to loose money policies.
