Interest rates are probably not going any lower

Both the stock market and the U.S. bond market have been gaining in price since the end of the so-called great recession (i.e., so-called because the recovery has been so bad that it should be called a depression). In bonds, interest rates move opposite the price. So, we have very low interest rates now. This is because there is very low demand for loans. It’s simple supply and demand. If there was a higher level of business activity, and if consumers weren’t tapped out, a higher demand for loans would inexorably raise the price (the interest rate) of the loans. The lack of business activity and the low interest rates makes it very difficult for savers to accumulate any money. The amount that can be earned in relatively safe interest vehicles is less than the rate of inflation for rent, food and gasoline.

The S&P 500 rose over the last four days, but Fridays gain disintegrated to end with no gain at all. It shrank in the presence of resistance from the bars between July 27 and August 8 – all at very close price levels. The Nasdaq Composite also gained over the last four days. But, it had been below the bullish trend line that began in January, and just crawled back above on Thursday. The DOW followed a similar example of a chart that is, obviously, going nowhere quite slowly.

 

My table of stock-market sectors continues to show a divide between the Technology Group and the Cyclicals Group. The Technology Group gained 1.23% while the Cyclicals Group gained only 0.3%. The biggest movers in the Cyclicals group was a big gain in the Automobile and Basic Materials (e.g., gold mining) sectors with big losses in the Media and Energy sectors. Despite the biggest relative-strength gain by the Automobile sector, its fundamentals reflect a bottom-dweller rather than a leader:

 

Symbol  3-Year Earnings Growth  3-Year Sales Growth
LDL 24 7
CYD -19 -10
OSK -1 -2
HMC -7 4
GNTX 12 11
DAN 24 -4
TTM -27 0
DLPH 13 3
GT 24 7
F 10 3

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