|I love charts. This one, from Wikipedia, is lying to you.|
Can you spot the problem?
At best, it is a snapshot, but it is a snapshot that we all know about. We may be befuddled by S&P and NASDAQ and know that our retirement funds are in some business-level melange of stocks that may or may not be on these lists. But the Dow (named after a real person who created it), is something instantaneously recognized as the heartbeat of business.
And that heartbeat has picked up a bit of arrhythmia. Over the past fifteen years, this blog has seen the DOW soar upwards and crash mightily, only to regain its footing and push on to even greater heights. I use this as an example of American Optimism at its finest - if we all clap hard enough, Tinkerbell will pull herself off the tarpaulin and we will start again.
And the past ten years or so have been pretty indicative of this. It has been an even-growing increase in value ever since the last time a GOP administration crashed us into the pavement. And yeah, I'll put it on the various incumbent administrations for things, since they are more than willing to take the credit when things are going boffo. Until recently, the White House has been pointing at the DOW as indication of how strong the country is economically. Until it isn't.
The first year of an administration has to deal with the successes and failure of the previous admins, for good and ill. The Obama administration had to dig out from the Great Recession, and the current administration of Individual-One benefited from a strong economy coming in. This was made even better, as far as the big boys were concerned, by tax policies that put a lot of loose cash into their pockets.
And some of them used this sudden infusion to reward its workers, to update its equipment, and to compete better in the marketplace. But the vast bulk of them used it to buy back shares (making the shares controlled by the company worth more through scarcity) and to use the sudden liquidity to get rid of ailing sectors (closing down factories and costing jobs) and seeking better markets (closing down factories and costing jobs). And since there were no strings on the governmental largess, they took the money and ran.
And the market has seen amazing swings upwards and downwards, depending on the mood. It raced past 24k and 25k is long, looping arcs, and kissed 26,000 before retreating again. Now, the news is bad - trade wars, instability, the government being currently shut down, increased interest rates from the Federal Reserve, and, oh yeah, massive investigations of the inherent corruption of the current administration that could at any moment result in a congressional investigation of your particular industry. So things are not looking particularly rosy?
Well, then we the treasury secretary calling the major banks from his vacation and yelling at them - "Whatever you do, Don't panic!" So naturally things take another dive.
And what does this all mean? For those that have gold, it means they make less gold for a while, they hunker down, make safe bets, and wait for Tinkerbell to get back off the mat. For the rest of us, it means that things are probably only going to get dicier for a while. Factories get closed because there isn't enough demand, as opposed to just boosting the bottom line. Those mutual funds? Yeah, they're not going ever onward and upward. And more than a few rich people to come demanding other people pay to keep them rich.
Of course, with a volatile market, it could switch gears just as violently and return to "normal" (which is to say, going ever upwards). Or it could just sink again, returning to a more rational level.
Whatever happens, it will be interesting. Buckle in.