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With the U.S. presidential election out of the way, the economy has
taken center stage lately and for good reason: the economy typically benefits
during a presidential election year while the 4-year Kress cycle is also
peaking. The latest economic reports strongly indicate that the U.S. consumer
has benefited (or at least feels he has benefited) from this year’s
presidential cycle and the loose money it typically brings.
The 4-year cycle peak is over, however, and year 2012 is coming to a
close. Unless the Obama/Bernanke administration can pull an ace from its
sleeve – and soon – 2013 is looking to be far bleaker than 2012.
Earlier we mentioned the positive payroll report that was released on
Friday. The U.S. economy has become a source of optimism in the mainstream
financial press lately, helped by improving numbers in the jobs market,
retail sales, real estate prices and consumer confidence. By one measure of
consumer confidence, consumers haven’t been this optimistic about the
economy’s prospects since 2007. Retail sales have increased for three
consecutive months, while the U.S. savings rate fell from 4.4 percent to 3.7
percent from the end of June to the end of August. Clearly, the typical
American consumer is feeling better about the economy.
Businesses don’t share this sentiment, however. Companies of all
sizes are reducing the number of investments they make, causing capital
spending to drop. According to Bloomberg
Businessweek, “Orders for non-defense
capital goods, a proxy for expectations of future business spending plans,
fell at an annual rate of 17.8 percent from July to September, the steepest
decline since the first quarter of 2009, the last few months of the
recession.”
Businessweek further pointed out that company CEOs are gloomier
on the profit outlook than they’ve been since the third quarter of 2009
and foresee slower economic growth for 2012 and have lower expectations for
sales, capital expenditures and hiring. As one analyst observed,
“Corporate earnings do not paint the picture of such a positive
consumer that we’re seeing.”
Although there is not a definite correlation between consumer spending
and corporate spending, businesses do tend to be more forward-looking than
consumers. Could it be that corporate America sees something on the economic
horizon that consumers don’t see – something that has made
corporations fearful of spending?
The year 2012 has been a relatively good one for the economy but keep
in mind that after the 4-year cycle peaks the momentum behind a strengthening
economy tends to wane. The first year of a presidential cycle is typically
one of the worst and that doesn’t bode well for the 2013 outlook.
What I find somewhat troubling is that while our in-house New Economy
Index (NEI) is still technically in a rising trend, it has been weakening in
recent weeks and has already fallen below its 12-week and 20-week moving
averages for the first time since 2011. If the 12-week MA falls below the
20-week MA while the index itself is declining we’ll have the first
economic “sell” signal since early 2010. That in turn would bode
ill for the 2013 outlook and would pretty much confirm the bearish picture
the Kress cycles paint for next year.
 
The NEI is still a few weeks away from completely rolling over and
likely won’t give a sell signal before Thanksgiving. If it does confirm
a sell signal by the end of this year then we’ll be able to say that
the latest spate of bullish economic headlines was a classic case of
everything looking rosy at a top. We might also say that, as is often the
case, presidential election years can paint a very deceiving picture of the
economy.
Clif Droke
2014: America’s Date With Destiny
Take a journey into the future with me as we
discover what the future may unfold in the fateful period leading up to
– and following – the 120-year cycle bottom in late 2014.
Picking up where I left off in my previous
work, The Stock Market Cycles, I expand on the Kress cycle narrative and
explain how the 120-year Mega cycle influences the market, the economy and
other aspects of American life and culture. My latest book, 2014:
America’s Date With Destiny, examines the most vital issues facing
America and the global economy in the 2-3 years ahead.
The new book explains that the credit crisis
of 2008 was merely the prelude in an intensifying global credit storm. If the
basis for my prediction continue true to form – namely the long-term
Kress cycles – the worst part of the crisis lies ahead in the years
2013-2014. The book is now available
for sale at:
http://www.clifdroke.com/books/destiny.html
Order today to receive your autographed copy
and a FREE 1-month trial subscription to the Gold & Silver Stock Report
newsletter. Published twice each week, the newsletter uses the method
described in this book for making profitable trades among the actively traded
gold mining shares.
Clif Droke
is the editor of Gold & Silver Stock Report, published each Tuesday and
Thursday. He is also the author of numerous books, including most recently,
“2014: America’s Date With Destiny.” For more information visit
www.clifdroke.com
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