Gold recently has been selling off. Is this just profit taking or does this demonstrate a structural change in psychology? I believe it's the latter. Stocks will perform poorly next year due to weak GDP. Here are the growth laggards for GDP:
Consumption- The housing market is hurting wealth creation and thus slowing consumption. Real income for income earners making less than $45, 000 is going down. The unemployment rate is still stubbornly higher than the natural rate of unemployment. Structural unemployment is a major issue that will increase the natural rate of employment from 5% to close to 6%. The Nordstrom consumer will prop up retail sales, but the WalMart consumer needs to fully participate to drive retail sales back to trend.
Investment-Companies are reticent to spend or hire due to the lack of transparency from the political environment. The election year will create more uncertainty and thus delay capital projects.
Furthermore, Europe will act as a drag on profits. S&P 500 (NYSEARCA:SPY) companies derive 14% of sales and 18% of profits from Europe, according to a report by Bank of America (NYSE:BAC).
According to Rick Newman from U.S. News and World Report, 40 percent of profit for firms listed in the S&P 500 stock index now come from overseas.
Gov.- Government is cutting their budget federally and locally.
Net Exports- The appreciating dollar will decrease our exports and increase our imports. Europe and the BRICs are slowing and exports to these regions will diminish.
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