Some charts to tell us where we are – or may be – in the investment cycle.

I read often these days that the market for us long term,, retirement investors is about to roll over and die, taking much of our gains with it?

Is that true?

I don’t think so, but then I don’t really know. I do know that the market seems to have a sufficient amount of worry to move higher on the ever-important wall of worry.  The scariest times, remember, are those when everyone, including the baggers at the grocery store and the guys in auto repair, are in the market and tallying up their gains.  That’s a moment when we should all run for the exits.

But that ain’t now.

Let’s look at a few charts to help us understand where we may be.

First, take a look at the indebtedness of individuals, an important index of people’s abilities to buy or manage things other than pay down debt.

That chart shows a lot of health of households, or at least management of their debt loads.  I wish I could say the same for the corporate sector and government, even if both of them make up, together, only about 30% of the economy.

Here’s a peek at the rising corporate debt loads.  Perhaps rising as steeply as it is because companies are loading up on debt while rates are still low. And borrowing is a lot less expensive than issuing new stock.

Then there’s government’s debt load, which is a problem even if, overall, government is maybe only 15% of the economy. I don’t have a very current chart for government, but suffice it to say, government’s debt load – state and federal – are not on diets. Here’s one image, a bit dated to help us see the magnitude of the debt load of the federal government.  I could understand the explosion in government debt to fight WWII, but more recent increases are to support a larger and larger welfare state.  What would we do if and when a real crisis comes along again?

Image result for image, chart of government debt

Next, I’ve used this one before to help us gauge the likelihood of the next recession, an event that typically tears stock markets up – and retirement savings.  The fact that the market has generally risen since March of 2009 is enough for some people today to say that its due for a fall.  I’d rather look at the data, and the data are not that encouraging to those who think our markets are about to tumble or are “cruising’ for a bruisin'”.  Here’s data from the St. Louis Federal Reserve, which I hope would lead a sensible investor to conclude that this bull market is still in place:

Then, take a look at Doug Short’s four key indicators of the likelihood of a recession coming down the tracks.  Right now, not one of his indicators in pointing in the wrong direction.  But a few months ago, some were – at least for a while.

So, in spite of the terrorist threats ranging around the world, and in spite of our government’s being tied up in knots, the business and investing worlds see opportunity and a lack of hostility from the government right now.

Things could be a lot worse.

God bless you.


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