I'd like to get a few things on your radar.
Long Term Weather Forecast
CBS News reported on Friday that the coming El Nino will be one of the strongest ever. The strong weather pattern is credited with reducing the number of hurricanes in the Atlantic Ocean this year, and given the forecasts for this winter, it may also bring needed rainfall to drought stricken parts of the United States.
From the Climate Data Prediction Center, issued on August 20:
Note the significant chances for below average temperatures for the southern United States. Alaska and the Pacific Northwest should expect warmer temperatures this winter.
Here's the outlook for precipitation for the same time frame:
Much of the southern half of the United States will see an elevated chance of precipitation during this same time frame. If you overlay these two charts, it appears that New Mexico, the Gulf Coast, and the southern Atlantic coast should expect an increased chance for winter weather events this year.
I don't hold myself out as a financial expert, but I do think there are a few issues we should keep in mind moving forward over the next few months.
First, talk continues of whether China will move to a gold-backed currency in some form or fashion. There are some logistical restraints on such a move, but by no means should the investing public discount the desire of Chinese policymakers to move the yuan towards a globally accepted currency.
Commentators at Bloomberg believe such a move "could create fireworks" in the markets. While I don't profess to know the extent of the impact such a move would have, it bears watching in the coming months.
Meanwhile back home, the U6 unemployment rate fell to 10.3 percent in August, a low not seen since July 2008. The official employment rate - the U3 rate - fell in August to 5.1 percent, taking the employment rate to April 2008 levels.
Such moves would normally be considered healthy, although other data points should raise concerns. For example, the labor force participation rate currently sits at 62.6 percent - a level not seen since 1977. Bear in mind a larger participation rate means more people are working or looking for work. So while unemployment numbers continue to drop, that drop is being fueled in part by fewer people in the workforce.
What's driving the exit from the labor force? As U.S. News and World Report explains, the drop in the participation rate has actually been ongoing for the last fifteen years. However the speed of the exodus ticked up during the Great Recession and has remained relatively faster since then. Much of the exodus comes from the retirement of baby boomers, which would be expected.
Perhaps the more concerning data point, according to the article is that "the participation rate of so-called prime age workers (those between 25 and 54 years old) has slipped in recent years. This is an age bracket that has mostly completed educational requirements and isn't yet retiring, so prime age down-ticks are difficult to explain." Bear in mind that as fewer people remain in the workforce, the task of paying for the social insurance benefits provided those outside of the workforce (and for some workers still in it) falls on a smaller number of workers.
The Federal Reserve continues to contemplate a rate hike. According to USA Today's piece dated yesterday, "this week's Federal Reserve meeting is shaping to be the most dramatic in recent memory, with economists divided on whether the central bank will raise its benchmark interest rate for the first time in nearly a decade." Clearly the historically low interest rates we have experienced over the last few years will have to go up at some point. What sort of impact will that have on the markets and the economy?
The equity markets continue to show signs of volatility. The Dow is down 7.8% year to date, with much of that drop occurring in the last three weeks. The markets have had a good run since 2009. Should we expect a normal correction, or are there other factors that will play into future trends in either direction? Take heed - statistically, those who are in the market for the long term do well.
That's not to say all is well in global finance. Our national debt currently tops $18.3T with a mere $3.1T in tax revenue. Many will debate whether our debt is a concern. I would encourage you to do you own research and reach your conclusions.
So are the economy and the markets improving or heading for a major correction? I find people's views on that question hinge largely upon one's political affiliation. Regardless of yours, I think it's imperative to pay attention to all of the data.
I'm not sure where to start, given the host of things that are going on now. For example:
Suffice it to say there's always something going on around the world warranting our attention
So What Should We Be Doing Now?
As the scriptures tell us, there will be wars and rumors of wars. There will also be a level of turmoil and volatility in the financial markets. We will have wet and dry spells, hot summers and cold winters.
I would suggest we need to keep doing the basics - being prepared for a host of things. Preparations for one problem generally prepare us a host of problems.
Don't let the news get you down. Stay focused, work towards self sufficiency, and help others do so along the way.
Here's where I tell you what I think about things I think about.