In the past few weeks all eyes have been on the stock market as it has hit a speed bump this month following its big April and May rally action. The reality is that the nature of the economic recovery is revealing itself in recent weeks. There is no “V” bottom, but instead as I wrote last week a muddle through situation going forward.
This isn’t because of the virus, but because of the massive debt loads so many companies brought with themselves coming into this year. A decade of record junk bond debt creation for stock buybacks has created a situation where many companies are now classified as “zombie companies.” They are unable to grow or innovative, but are able to survive with Federal Reserve action. I talked about this with Scott Horton on his podcast in an episode you can find here.
This is why we are in the current moment where the Federal Reserve must print money now nonstop in order to keep the economy alive and the stock market afloat. And the US Federal government now must join in with what looks like endless deficit busting stimulus.
The US dollar is starting to now slowly roll over as a result as you can see from this chart of the US dollar index.
The US dollar index now has support at 96. When that breaks this year it is going to begin a new leg down. Gold tends to go up when the dollar goes down and as you can see from the gold plot on the bottom of this chart gold made a new high just last week.
Gold, silver, and mining stocks are now the place to be.
It is as simple as that.
My focus is on helping you profit from the most powerful trends in the market. That’s why I will have a new stock pick on Wednesday the first of July focused on the world of mining stocks.
-Mike
