Stocks gave back yesterday’s bounce from the drop Monday. Gold, which had dropped hard Friday and Monday, stayed at the low level hit Monday morning.
European stocks were up in the morning but a very poor report on German car sales and rumors of a credit rating downgrade for Germany hit European markets hard in the afternoon.
That highlights what everyone will be watching over the next few weeks – will this be the 3rd year in a row that economic data in the spring and summer are disappointing? If so, the markets have fallen somewhere between 5% and 12% the last three years and probably would again this year.
I think its a problem with the seasonal adjustments to most economic data that may be skewing the fall and winter data too much higher and giving it back in the spring and summer. Seasonal adjustments, which many assume are small from noting the word “adjustment,” can actually be huge, sometimes as much as doubling or halving the raw number. Employment reports are notorious for this kind of thing.