Is it politics with all of its nastiness? Is it the Fed, with so many voices talking about rate increases? Is it the consumer with punk spending? Is it earnings for some companies coming in lower than expected? Is it oil unable to break decisively through $50?
Every day we try to figure out what the heck is ailing this market. I went so far this weekend as to look up the fabled July 15, 1979, "crisis of confidence" speech this weekend, to see what Jimmy Carter said during a period where the country was suffering from a collective malaise. "What was really disturbing me," he told the country, "was that for the first time we actually got numbers where people no longer believed that the future of America was going to be as good as its past. It is a crisis that strikes at the very heart and soul and spirit of our national will."
Of course, at the time we were suffering from gas lines because of an OPEC embargo and from wild inflation, in part caused by a weaker dollar that eroded our savings.
Now the price of oil is on tenterhooks after being cut in half and the strong dollar's hurting earnings.
Still there's no doubt that there is some sort of aversion to owning stocks, which is part of a belief, I think, that the future will be worse than the past for many Americans. Carter talked about a poisoned political environment but those must seem like halcyon days compared to the partisan rancor now.
The people rebelled against Carter's malaise speech and ended up voting in a man who talked and acted more positively, Ronald Reagan, and the great bull market that was interrupted only by the Crash of 1987 and the horrendous Great Recession selloff had begun.
I am not making a statement about who will win in November. But I am making a statement that there is no doubt that the rancor and the nature of the debate are putting a lid on stocks. In a world where a tweet by non-candidate Bernie Sanders sends down the entire drug group, do you want to own the drug stocks? Consider that once again, Valeant (VRX) , which we thought had pretty much gotten off the radar screen of the problematic and serial price increases, is seeing its stock near, again, its 52-week low.
Plus you have to ask yourself, do you want to be sitting on stocks with exposure to international trade when globalization is under assault by Donald Trump or your taxes will go higher with Hillary Clinton? You may need every penny you can get if the deficit keeps going up and one candidate wants to raise taxes.
We had a very smart guy on last Friday, John Cassimus, who founded Zoe's Kitchen (ZOES) , the extremely successful Mediterranean fast-casual restaurant chain, to try to figure out what ails the group. His answer was quite telling: "Honestly, for me, the election, I think, is having a big impact, and I think people are really scared right now. They don't know what's going on."
But that political situation only scratches the surface of what's awry here.
Almost every day, we get numbers that are weak or showing no growth. There have been multiple revisions down of the U.S. gross domestic product. Yet the drumbeat of rate hikes continues apace. In the years I have been investing, I have been in many rate-hike cycles. While I am not crazy ever about fighting the Fed, which is the term for buying in spite of the rate hikes, I am used to seeing hikes only when the economy is getting hotter, not weaker. It is almost counterintuitive to have such rate talk now. That's why the endless prepping for the now-seemingly inevitable December hike seems almost fanciful. If we had revisions up, game on. We are getting just the opposite.
There are other reasons to fear what can only be described as fear itself. We had a remarkable call from Delta (DAL) , the airline company, last week and in addition to management saying lower-fare airlines are taking share, there was the direct mention of terrorism really hurting international travel. Between the strong dollar and terrorism, this bellwether group just can't carry its own weight.
Let's face it, though, there's something else at work in many sectors: too many companies. Zoe's Kitchen founder Cassimus told us "there's a lot of competition, there's been tremendous amounts of small fast-casual start-ups, mom-and-pop restaurants," and all of those restaurants can't survive because there simply aren't enough diners out there.
Have you noticed the stock of McDonald's (MCD) of late? It's been shelled beyond all recognition from $131 to $112 in just a few months' time. Not encouraging.
If it were just restaurants, that would be one thing. But the logic of too many competitors applies to so many different industries. Take retail. We've got dollar stores going against discounters going against club stores and against direct-to-consumer companies including, of course, Amazon (AMZN) . We know we have way too many doors, way too many malls, way too many retailers in malls. But they just don't shake out. The number of chains has barely decreased. Think about it. In the old days, we would have seen outfits like Sears (SHLD) and Kmart go under. Not now. We have a motivated owner who refuses to quit and will do anything to keep it alive. Do we need Target (TGT) and Kohl's (KSS) and Macy's (M) and J.C. Penney (JCP) and Costco (COST) and Walmart (WMT) and Bed Bath & Beyond (BBBY) and all those other stores that tend to sell the same thing? (Amazon is part of TheStreet's Growth Seeker portfolio. Costco is part of the Action Alerts PLUS portfolio.)
I don't think so.
There are too many tech companies. Sure, we have had a scattering of mergers. Linear Tech (LLTC) got together with Analog Devices (ADI) . Broadcom (AVGO) merged with Avago. For the most part, though, there are so many companies in these spaces fighting against each other for business that you have to be fearful around earnings time, and here we are!
Sometimes I feel that's part of the problem with the banks. In the old days, every time they seemed to run out of room for growth, they would just buy other banks. But the big banks are so big now they aren't allowed to do any more buying. They've lost that spur and in its place are myriad regulations that cut into profit.
The question you might ask, given that there are so many reasons why we should get hammered, is why isn't the market down more? I think the answer remains that stocks are still the best game in town, given how low interest rates are. However, rather than being a bountiful option, they have become much more of a lesser of two evils. The risk seems just too high vs. the reward for so many stocks I follow. There seems to be only one cure for them: lower prices. When we get there, we can be more enthused. Right now, though, it just seems like there's as good a reason to buy a stock as there is to sell it. That changes when either the fundamentals improve -- hard right now given the backdrop -- or the price, including the yield makes it too difficult to ignore.
Neither strikes a chord here now. So we wait for more certainty, more clarity and less risk even if it means all are made definitive by lower prices.