Is it time for markets to panic? Gasoline prices are approaching the “danger zone”, Copper prices indicate a more precipitous decline in risk assets, Consumers are clipping coupons at a rate not seen since before the 2007 recession… Warning signs are all over the place!
… Watching the Daytona 500 from the “danger zone,” where cars whip by at high speeds of around 175 mph to 200 mph — but can also burst through the walls in a crash — can be a thrill.
But gasoline’s “danger zone” may be just plain scary.
At $3.75, retail gasoline prices are nearly back in the “danger zone” marked by the highs of around $3.85 to $4.10 per gallon seen over the past five years, as you can see in Figure 1. This range has marked a “danger zone” for market participants.
When gasoline prices reached this range in the past, it preceded the stock market slides experienced in…
I think Copper is a good tell here. We’ve been seeing some weakness unfold, no question, but this one could either foreshadow a more precipitous decline in risk assets, or hang on to that key multi-year trendline support and offer more of a “stay long” signal.
Consumers are clipping coupons at a rate not seen since before the 2007 recession, and that’s a troubling sign, according to Coupons.com CEO Steven Boal.
The website tracks how often people view and print coupons and their redemption rate. Right now, Coupon.com‘s Internet Coupon Index, as it’s called, shows a spike in coupon offers and demand.
This pattern is almost identical to the one that played out right before the last major economic downturn. The higher the index value, the more consumers are under economic pressure, Boal told CNBC.com.
Pros: Four-year rally in stocks is over, the next stock market crash has already begun. Warning signs all over the place!
And there is certainly no shortage of logic to support that view.
Massive U.S. federal budget cuts are looming, political instability in Europe is returning, and currency values around the world are falling.
And by many measures, U.S. stocks look due for a comeuppance. Valuations are elevated, profit margins are at all-time highs, and there are signs of investor complacency everywhere.
Of course, not everyone thinks stocks are headed for a crash. In fact, some experts think we’re at the beginning of a new long-term bull market and that investors should go “all-in.” But we’ll focus on those folks later.
Much of the recent frenzy of stock buying has been boosted by borrowed money. Margin levels are rising fast.
Earnings growth expectations are tumbling. And earnings are the most important drivers of stocks.
Profit margins are already at record highs, and analysts expect them to go higher. Profit margins tend to be “mean-reverting,” meaning that they don’t stay at record levels (high or low) for long. So many analysts think a margin correction is coming.