The Fed’s December Dust Bowl

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

We can go from boom to bust

Advertisement.

From dreams to a bowl of dust…

–RUSH, “Between the Wheels”

In the Great Depression era of the 1930s, the term “dust bowl” was used to describe the drought-stricken Southern Plains region of the United States that suffered severe dust storms during a dry period in the 1930s. Yet the term is more commonly associated with the blighted plains of the United States and global economies during that period.

Advertisement.

As for markets, well, we know that this was a difficult and bearish period as well, particularly in the aftermath of the 1929 crash. That’s why it has become a disturbing comparison in the financial media of late that has noted that stocks are having their worst December since 1931.

The chart here of the Dow, S&P 500, NASDAQ Composite and Russell 2000 shows just how tough things have been since the Nov. 30 close. The losses month to date in the major indices are still smaller than the Depression-era losses. Back then, the S&P 500 plunged 14.5%, while the Dow plummeted 17%. Still, the pain was very real in the 1930s, and it’s very real today.

And speaking of today, the Federal Reserve announced a quarter-point hike in interest rates, a move that was widely expected by most analysts, including yours truly. Yet what most analysts were expecting was a “dovish hike,” one with a clear signal that the Fed would ratchet down its language on future rate hikes in 2019 and beyond.

Advertisement.

Well, the Fed did issue a somewhat dovish hike, but it wasn’t dovish enough for the markets. One of the key wording changes in the Federal Open Market Committee statement that was interpreted as not dovish enough came in the second paragraph, and it was the addition of the word “some” to the phrase “further gradual increases.”

Exclusive  Three Virtual Reality Stocks to Buy

That’s basically the Fed saying that it wants to remain flexible in its approach to rates, but that it’s not willing to go out and fully drop the notion of further gradual increases. As such, stocks went from being up some 300 points on the Dow, before the Federal Open Market Committee (FOMC) announcement and Fed Chair Powell’s press conference, to close down 352 points, or 1.49% on the day.

The disappointing combination of another rate hike and not-dovish-enough signaling means the December dust bowl is probably going to get a lot dustier from here.

Consider yourself forewarned.

*********************************************************************
A Practitioner of the Arts

Advertisement.

“The art of investing is being able to adjust to change.”

–Gerald Loeb

A lot of investors, advisors and pundits “adjusting to change” these days, and we’ve been forced to do so by a confluence of market headwinds. Yet as the founding partner of E.F. Hutton & Co. said, the ability to make those adjustments is truly the art of investing. So, I say, bring on the change. The skilled practitioner will make the necessary adjustments to prevail.

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

share on:

Like This Article?
Now Get Jim's FREE Special Report:
The Top 11 Dividend ETFs to
Buy Right Now

Get up to 5X the yields of traditional income plays.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle
LEARN MORE HERE

DayTradeSPY

DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops
LEARN MORE HERE