But there’s another reason your 401K may be tanking soon, says the president of Bowyer Research, an investment and macroeconomic forecasting firm.
A weak July jobs report saw unemployment increase to 4.3 percent, a three-year high.
The Fed may be poised to step in, but investors thinking long term are focused on what they see as more bad news coming down the pike: a potential Kamala Harris presidency.
The Dow Jones Industrial Average surpassed 41,000 last month but has since dropped into the high 30s. It may continue to drop, Jerry Bowyer told the Washington Watch program last Friday.
Indicators have shown that the Fed will be “pumping money into the system and rescuing the economy, and yet the stock market still crashed,” he told show host Jody Hice.
Why?
“That suggests to me that investors are looking out into the future, looking at the Harris trade, and I think if we get President Harris, we can expect a lot more trades like this...a lot more days like this, maybe even years,” Bowyer said.
Following that Friday interview, the markets opened Monday and went downhill all day. By the end of the day Monday, the S&P had fallen 3%, Nasdaq slid 3.4%, and the Dow Jones Industrial Average tumbled 2.6%, according to an alarming Fox Business story.
The closing numbers from the S&P and Dow were the worst since September 2022.
Last week, Harris took the lead over Donald Trump in White House betting odds for the first time. The market is responding to that, Bowyer said.
Friday’s sell-off was broad, touching most categories except gold and cryptocurrencies which are hedges against anticipated future inflation, he said.
“We have had stagnation over a long period of time, and markets might be looking forward and saying that with a Harris presidency, even the Fed can’t bail us out. Even the Fed can’t rescue the stock market by pumping money into the system,” Bowyer said.
Inflation hedges did alright Friday, but anything that relies on a healthy economy underperformed, he said.
In terms of interest rates the “markets are convinced that we’re going to get almost a whole percent cut,” Bowyer said.
That should mean good news for the economy, but Bowyer doesn’t believe that’s the case.
“I’m not going to try to be smarter than the markets. If that’s what they think, that’s what I think is going to happen. Which again raises that question, that’s supposed to make things easy. That’s like Prozac in the water supply. Where’s the sugar high from the easy-money Fed? Well, we don’t get it because we have a (possible) Harris presidency hanging over us suppressing the markets saying, ‘We don’t even think the Fed can rescue us.’”
Don’t read recession hedges wrong way
Healthcare and construction showed growth in July but not enough to impact the markets.
Bowyer said the construction numbers reflect an industry just getting its head above water again after a difficult stretch.
Health care almost never underperforms. It is pretty recession resistant, Bowyer said.
“You might not buy a new house," he reasoned, "but if you need double bypass you’re going to get the double bypass.”
If recession hedge sectors are doing well, that means investors “sense that a recession is not” far away, Bowyer concluded.
