Tag Archives: financial market

Dawn J Bennett Weighs in on the 2016 Presidential Election and the Impact on Financial Markets

Dawn J Bennett, host of the national radio program Financial Myth Busting, and CEO and Founder of Bennett Group Financial Services, shared her thoughts on the 2016 Presidential Election and the impact on financial markets in an October article titled, “Of Purse Strings and Presidents.”

As the presidential election approached, Bennett asked people who they were going to vote for on November 8. Many responded with a simple “no one,” despite America very much needing the active participation of the people in governing the nation.

Understanding the dissatisfaction of the candidates Americans were left to choose between, Bennett wrote, “…it’s as if we Americans are being held hostage to a poorly written TV show, watching the race for the highest office in our land become a race to the bottom.”

Bennett stressed that Election Day couldn’t come soon enough to end the international embarrassment that the election was. Merrill Lynch had said, “Despite the descent of politics, the subjects having little bearing on financial markets, its stench nonetheless permeates everything.” Bennett agrees.

Money is the driving force in the future of American politics, and for far too long have fundamentals been disregarded. Bennett wrote, “Fundamentals have too long been ignored: a poor and unstable economy; a lack of consumer liquidity; employment and income savaged by many elements, particularly poor-quality trade agreements, shifting wealth off shore. The financial system is no longer a free market system in anything but name, operating outside of reasonable norms and controls.”

Despite the election results, the U.S. financial markets and the U.S. dollar are likely to experience near-term turmoil.  While many would assume it would trigger a flock to gold, Bennett believes the Federal Reserve is concealing the price so it appears that our economy, markets, and political system are stronger than they really are. This is something the Federal Reserve did back in September 2011, in which gold hit a peak and then dropped 400 to 500 points. This year, gold is up by roughly 17% year-to-date and silver is up 25%. 

Bennett states that this is the key reason why so few investors actually expect a decline in U.S. stock markets. Investors are under the assumption that the Fed has their back. But in the last eight years, the Fed has controlled the stock and bond markets, and the practice of buying the dip has been successful, and will likely continue to succeed unless members of the Fed’s Board of Governors change. This is only likely to happen if Donald Trump is elected.

The breadth equity market has fallen in recent weeks, which doesn’t usually end well for stocks. Typically, the indexes follow breadth. These divergences have been rare since 1990, and have generally been bad for investors. As Bennett explained, “In the seven instances that occurred before this year, all but two actually portended further losses. December 1990, February 2000, and October 2008 are notable examples. After 2008, equities ended up erasing half their value over the next two years. It should be clear that our markets have no connection with reality. Earnings and revenues have dropped substantially widely across the S&P and Dow constituent stocks, and even the Russell 2000.”

The Dow fell 508 points on Black Monday in 1987, which is a 22.61% drop. The 1929 stock market crash resulted in a 24.55% drop. Some analysts believe we could be facing a similar situation due to the collapsing breadth of the market and our increasingly weak and unstable fundamentals. In today’s market, that could be as much as 400 points.

While the 2016 Presidential Election has passed, when voting in future elections Bennett stresses that you  take into account your income, your investments, and your future. Protect them and be ready when things go downhill.

 

What Will Happen to Our Market Bubbles?

Financial expert Dawn J. Bennett recently wrote an article titled, “Forever Blowing Bubbles”, in which she describes how central bank driven monetary policy and market manipulation will likely cause asset bubbles to explode dramatically and cause major collateral damage.

There have been numerous signs over the past few weeks that suggest this will occur soon. In the Financial Times, Mark Spitznagel, a billion dollar hedge fund manager said, “Markets don’t have a purpose anymore. They just reflect whatever central planners want them to.” He goes on to say, “This is the greatest monetary experiment in history. Why wouldn’t it lead to the biggest collapse?” The article also quotes bestselling author and Universa advisor Nassim Taleb, who said, “Being protected from fragility in the financial system is a necessity rather than an option.”

They aren’t the only ones with this view. Dawn J. Bennett notes, “The Bank of Japan, acknowledging the violence being done to the yen by years of quantitative easing, said recently that they are setting aside money to prepare for losses on their huge holdings of Japanese government bonds which were put together and purchased through their printing of fiat currency once they are finally forced to stop monetary easing. Easing is a vortex that has sucked in the central banks over the last eight years, forcing them to continue blowing bubbles to follow bubbles to follow bubbles. Indeed, there have been calls even for our own Federal Reserve to go beyond QE to ‘helicopter money’, essentially going beyond interest rate manipulation and money printing by injecting ‘permanent’ money directly into private sector. Could this be why China is establishing a yuan-denominated gold benchmark for trading, in order to start backing their currency with real assets instead of academic theories?”

Among the biggest bubbles is the U.S. derivatives market, which is worth $1 quadrillion dollars by some accounts— about 20 times the value of the entire world economy. This is sheer gambling, says Bennett, not only with equities but also physical commodities.

Bennett points out a lot of evidence to support the poor fate for asset bubbles. The majority of asset classes are flat to negative year-to-date, and initial jobless claims recently spiked to 278 million after being up for two weeks. There’s continued weakness in corporate earnings, as well as increased layoffs, manufacturing data and wages. The recent FOMC meeting showed a possibility of increased interest rates, causing the June rate hike odds to move from 4% to 30% and the July odds from 20% to 50%

“What will happen to our market bubbles then? Many hope that the Fed will continue printing money, but that option continues to degrade our currency and economy,” Bennett says. “Something will eventually have to give.”