Well, what a first week of trading. Globally, stocks lost $2.3 trillion in market cap, while yields on bonds fell as money flowed in for safe keeping during the rout.
While China is thought to be the cause that lit the fuse behind the equity bomb, but there’s far more to it than that.
A global recession has gripped the planet, creating the economic slowdown in China, forcing Beijing to slash the value of the yuan in order to keep factories open.
Chinese investors are struggling to keep their wealth, while the government slashes its value by 10 percent through currency devaluation.
While the US added 292K jobs in December, wages have not risen with the thought that there is full-employment.
Digging into the numbers, we see that Americans holding more than 1 job is now at its highest level since 2008.
What this tells us that part-time workers are peaking, meaning they are working in jobs that get no benefits and low wages in service industry jobs.
Bartenders, waiters and waitresses, fast food employees are all categories that grew over the last year. So the jobs numbers look big, but the quality of those jobs are certainly lacking.
This is the reason behind the lack of inflation in the US. There is no wage growth, there is no job security and there are no benefits. So where will economic growth come from?
That’s why there is slowing growth across the globe. The US phenomenon of weak job growth in classical middle class positions such as manufacturing, engineering and business are vanishing and along with the higher compensation to afford non-discretionary spending is happening across the globe. Europe, South America, India are all seeing the same conditions.
The Atlanta Federal Reserve bank monitors in real time the projected US GDP through its GDPNow stat on its website. On the back of the 292K jobs created in December it ticked up Q4 US GDP to 0.8% from 0.7%.
That tells you what they are seeing as far as quality of the jobs created.
Fry cooks don’t buy homes. And that is where the US economy is right now. I’ll have more next week on how overvalued stocks are in this environment and how we could be 12K on the Dow before Valentine’s Day.