This bull market increasingly looks scary. Setting new record highs and extending deep into 2013 only makes it look more worrisome. It was only a little more than a year ago I recommended investors keep stocks as the largest portion of any long-term investment portfolio. But that advice came with the caveat that market risk would rise in 2013, and indeed I have become increasingly nervous about stocks this year. Although I have yet to declare a market top, and will not call a bear market until important technical levels are broken, I have not hesitated urging taking profits and raising cash levels by selling stocks as this market has set new record highs this year. Pictures can often convey more than words, and in this post I am going to highlight a few notable and scary charts related to the current stock market.
With the media focused on the political circus around the debt ceiling, not much attention was paid outside of financial circles to the newest GDP data announced late in July. But it is likely of more concern than the government’s self imposed borrowing limit. The first six months of 2011 were estimated to be the weakest in terms of economic growth since the recovery began. The first quarter is now estimated to have posted annualized growth of just 0.4 percent with the second delivering an uptick of only 1.3 percent. As a result economic forecasts are being lowered for future growth.
Looking into and understanding the devil of the details in government employment and economic reports reveals that the job market is likely to remain poor for some time to come. This most recent report however was marginally positive. The Labor Department reported on Friday that the unemployment rate rose slightly from 9.5 percent in July to 9.6 percent in August. In the stock market everything is relative, and relatively speaking the results of a slight increase were marginally positive because economist expected an even bigger rise in unemployment. The stock market response might have been called a relief rally had it been stronger, but it was more of a relief pop with the Dow Jones Industrial Average rising a little over 100 points.