Economic Confidence Index Plunges While Stock Market Makes Record Highs

August 2, 2016

The Gallup Poll has released an Economic Confidence Index which reflects the sentiment of Americans, as it pertains to the economy.

As the stock market makes new record highs and the housing "bubble" market soars, one would expect that the "average" American would be smiling from ear to ear. However, the chart below appears to present nothing but gloom and doom. The Gallup Polls results are dumbfounding the American public as to why this divergence has occurred. I feel we have touched upon a few points as to why this is occurring.

Firstly, half of all Americans do not even own one stock. Secondly, there are many US companies making large profits overseas. That may be positive for the company but that does not necessarily translate into a better financial position for mainstream Americans.

A survey was recently released showing that 62 percent of Americans do not even have $1,000 in their savings accounts. Most Americans are only one small emergency expense away from being on the streets. What this means is that many will simply rely on credit cards, friends and/or family for their funding, should a financial emergency arise. Is this meant to be our economic recovery?

How much do Americans save?

Housing values, which are being "artificially" inflated, only prevent Americans from purchasing their 'dream homes', as is reflected in low homeownership rates.

The housing market is once again too expensive for most American families to afford. During the last housing "bubble", many Americans were able to partake in the mania and enjoy equity gains although they were fleeting.

This time around, most of the gains are going to investors and large institutional buyers that have crowded out mainstream America. This is a first in history to occur…at least on this large of a scale. The homeownership rate is the lowest in a generation as many young Americans are saddled with unsurmountable student loans -- and consequently forced to return to living at home.

Inflated home prices coupled with decreasing incomes provide a recipe for disaster! Once again total wealth in the US is at a record high level. However, most of the gains are in the hands of a very few.

Americans are angry with the "establishment" - and are frustrated with their economic uncertainty

Americans no longer trust mainstream media. This is being reflected in the political climate: i.e. non-establishment candidates, Brexit, etc. - and even new asset classes like digital currencies like bitcoin.

The stock market is fully "decoupled" as to how good Americans are doing overall.

The SPX is up a stunning 220% since the lows that were reached in 2009. Moreover, the US Economic Confidence Index shows more people simply do not trust the economic numbers and media.

Concluding Thoughts

I continue to warn about a down turn in both the economy and stock market. The markets continue to mature. Moreover, the leading indicators point to a sharp correction in the financial systems in the coming months.

Safe haven investments have rocketed higher like bonds, gold, silver, mining stocks as smart money positions itself in preparation for a crisis. As I have mentioned many times already, it is just going to take one bad event or piece of data to cause the tipping point for the market. The question is when and what will it be?

Just like the 2008 bear market in stocks and financial down turn, this will be no different in terms of what will happen. It will be just like every previous bear market/financial down turn. Stock prices will fall, people will lose their jobs, companies go bankrupt…and housing defaults increase as personal spending comes to a grinding halt.

When it comes to our investment and trading capital, you can either ride the financial rollercoaster and do nothing, move to cash with some safe haven investments like bonds/precious metals, or bet against the US economy and watch your net worth reach new highs during a time when everyone you know is losing money, jobs and confidence.


Courtesy of www.TheGoldAndOilGuy.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several financial hubs like MoneyShow.com.

 

The volume of all the gold ever mined can occupy a cube 63 feet on each side.