Prior to the release of the US GDP, Atlanta Fed had the GDP Now at 1.9% and surprise, surprise, the released figure was 2.9%, higher than the consensus estimate of 2.5%.
Though the GDP looked good on the surface, the worrying component has been consumer spending, which increased by only 2.1% vs the previous quarter increment of 4.3% As you may well be aware of, it accounts for more than 70% of the US GDP. The GDP was boosted by the built up of inventories and exports. In fact, the export of soybeans accounted for the major increase in exports.
But why did the US stock market tank despite the good news in the GDP?
There are three reasons.
1) Consumer confidence fell to 87.2 from a prior 87.9. This means that consumers could be spending less in the coming months. This is not good for the economy
2) Bond yields have risen lately. The reason for the increase in yield is due to the sell off in bonds (Bonds interests are fixed. Higher price, lower yield. Lower price, higher yield). This was the reason why it got the market spooked. Will the sell off in the bond market continue? If it does it could cause a great impact on the global markets. As yield rise, the pressure to raise rates increases, which is bad for the markets. If it worsens, the sell off in bonds could cause a loss of confidence in the global markets, and investors could lose trillions.
3) The late afternoon news that came which the FBI said will reopen the case on Hilary's emails. This could be a black swan event if it results in Hilary pulling out or even a delay in the US Presidential Election.
As uncertainties continue to plague the global economy, gold and silver continue to trend higher
Here's a chart which tell us all is not well with the popularity of the Renzi's government in Italy. This could be another black swan event in December.
I continue to be bullish on precious metals, miners and inverse ETFs.
But why did the US stock market tank despite the good news in the GDP?
There are three reasons.
1) Consumer confidence fell to 87.2 from a prior 87.9. This means that consumers could be spending less in the coming months. This is not good for the economy
2) Bond yields have risen lately. The reason for the increase in yield is due to the sell off in bonds (Bonds interests are fixed. Higher price, lower yield. Lower price, higher yield). This was the reason why it got the market spooked. Will the sell off in the bond market continue? If it does it could cause a great impact on the global markets. As yield rise, the pressure to raise rates increases, which is bad for the markets. If it worsens, the sell off in bonds could cause a loss of confidence in the global markets, and investors could lose trillions.
3) The late afternoon news that came which the FBI said will reopen the case on Hilary's emails. This could be a black swan event if it results in Hilary pulling out or even a delay in the US Presidential Election.
As uncertainties continue to plague the global economy, gold and silver continue to trend higher
Here's a chart which tell us all is not well with the popularity of the Renzi's government in Italy. This could be another black swan event in December.
I continue to be bullish on precious metals, miners and inverse ETFs.
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