In Wednesday’s Afternoon Edition, we outlined what we thought needed to take place before this market could stop the bleeding.
Two of those developments actually did take place today, namely a stabilization and bounce in the price of crude oil, and solid bank earnings from bellwether JPMorgan & Co. (JPM).
The market’s reaction to this news was strongly positive, as the Dow spiked some 300 points midday, or nearly 1.9%.
The stanching of yesterday’s bleeding is a welcome development for the bulls. But of course, one day does not a trend make. And to say that the jury is still very much out when it comes to which direction this market will take next would be the height of understatement.
Still, today’s glimmer of hope for market stability has allowed me to pivot a bit toward an issue that is reverberating this year throughout this most-unusual presidential election cycle.
That issue is a lack of income (call it income inequality), highlighted by a new survey showing that the majority of Americans are essentially "broke."
The national survey, conducted by website MagnifyMoney, found that:
After spending money on holiday gifts, a majority of Americans are "broke." 56.3% of people surveyed have less than $1,000 combined in their checking and savings account.
The survey also revealed several other scary statistics, including the following:
24.8% have less than $100 in their accounts.
23.8% have between $101 and $500 in their accounts.
7.7% have between $501 and $1,000 in their accounts.
16.4% have between $1,001 and $5,000 in their accounts.
27.3% have more than $5,000 in their accounts.
This lack of available cash in Americans’ accounts explains why two very extreme, and very different, presidential candidates are doing so well in their respective party’s race for the nomination.
Republican frontrunner Donald Trump keeps delivering his signature line, "Make America Great Again." I suppose if making America great again includes the majority of Americans having more than $1,000 to their name, then I can understand why he’s leading the GOP field with some 35% support in an average of national polls.
On the Democratic side, we have the very far left-leaning Sen. Bernie Sanders, who now leads in the polls in the second of the first two primary states (New Hampshire), and who trails frontrunner Hillary Clinton in an average of national polls by just 8.6 points.
When two nearly opposite sides of a presidential candidate coin — multibillionaire businessman Trump, and self-proclaimed fighter for the "little guy" Sanders — have such strong appeal, it’s no doubt at least partly related to the dire economic conditions reflected in the MagnifyMoney survey.
Unfortunately, I think voters who are looking to Trump, Sanders or any of the other presidential candidates to help solve their economic problems are looking in the wrong direction.
You see, the answer to an individual’s lack of money in the bank will not be found at 1600 Pennsylvania Ave.
Donald Trump is not going to take office, wave his billionaire wand and get anyone a better job. Nor can he help anyone gain skills that will enhance their earning power, or make anyone start spending less and saving more.
Bernie Sanders is not going to wave his collectivist wand and take money away from the top 1%, and then deposit it into the bank accounts of those who can’t muster up enough money to buy a few bags of groceries.
Now certainly, economic policies coming out of Washington can and do influence the fiscal health of the country at large. And to the extent that particular policies help to promote or denude economic growth, the president and the Congress can make things better or worse.
Yet for most people, the answer to their financial problems begins from within.
It begins with an attitude that says, "I accept responsibility for my actions."
Why do so many people have so little money?
It’s not because China and Mexico are "killing us" economically. And, it’s not because of a "proliferation of millionaires and billionaires" taking more than their "fair share" from "working families."
The reason so many people have so little money is because of a lack of skills employers are willing to pay a lot for, or bad and excessive spending habits, or a failure to plan for the long term.
Sure, there are many legitimate cases of extreme misfortune (illness, injury, etc.) that can lead someone into a bad financial situation. Yet I would argue that, for the most part, Americans in bad financial shape made some not-so-good life choices that led them there.
Until Americans take extreme ownership, without excuses, for their lot in life, the number of people who are "broke" will continue to rise.
Do you agree with me that the chief reason why so many Americans are broke has more to do with individual choices than with any policy emanating from Washington? Or, do you think I’ve underestimated the wider political role when it comes to individual financial health?
I really want to know what you think, as I am sure there will be some strong opinions here from many different sides. So, please leave me a comment on our website or send me an e-mail and tell me what you think.
Stocks rebounded strong in Thursday trade, erasing all of the downside in Wednesday trade. Higher oil prices and good bank earnings prompted the widespread buying. The S&P 500 gained 1.7% and the tech-heavy Nasdaq gained nearly 2% for the day.
• All 11 S&P 500 sub-sectors were in the green today. The Energy Select Sector SPDR (XLE) led the way — up a whopping 4.3%.
• Is it safe to nibble on Chipotle (CMG) share again? The stock rose 6% today after several firms reiterated their "Buy" rating amid the burrito-maker’s ongoing E. coli scare.
• Oil gained for a second day. WTI crude closed 2.3% higher at $31.20 per barrel. But we’re not betting on a bounce higher from here. In fact, here’s why we could see oil slide to $5 or even lower.
Good Luck and Happy Investing,
Uncommon Wisdom Daily