All the commentators are buzzing about how the latest installment of the Syrian crisis knocked stock prices down early this week.
The Dow Jones Industrial Average sank 170 points and other headline indices fell proportionately more after Secretary of State John Kerry charged the Assad regime with “moral obscenity” for using chemical weapons against its citizens.
In reality, though, Wall Street had already begun to stumble long before the crisis in Syria heated up more and Kerry fired his rhetorical cannon.The stock market’s central problem right now has nothing to do with war drums in the Middle East.
Instead its that interest rates (bond and mortgage yields) are simply too high for the slow-growth economy we’re in.
You could see it in Friday’s shocking report on new-home sales. July sales dropped 13.4% from month-over-month to an annual rate of 394,000. That made for the steepest drop in three years and was nearly 20% below what analysts were forecasting for the month.
Then, on Monday, durable-goods orders for July also came in well below economists’ projections, an early-warning sign that business confidence may be flagging in the face of excessively high interest rates for private-sector borrowers.
Luckily, bond yields tumbled again in Tuesday’s session, with the benchmark 10-year Treasury yield closing at 2.79% — the lowest level since Aug. 15.
If you want to see the stock market revive, as I do, you should hope and pray the bond rally builds a monster head of steam. Because the U.S. economy, along with other economies throughout the world, needs significant relief, immediately, on the rate front.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.