Resource World Magazine

10 www.resourceworld.com f e b r u a r y / m a r c h 2 0 1 6 ger companies affect its performance far more than smaller companies. Hence, only a strong performance of more than 60% gains by the top 2% by size of the com- panies in the index, such as Google and Amazon, for example, kept 2015 for the S&P 500 in the bull market column. In other words, the majority of the equities in the index were down and in the red for 2015. The sTealTh bear markeT You guessed it; we are currently in a "stealth bear market" where many stocks are actually down 20% from their peaks. Moreover, stealth bear markets are usually followed by full-on bear markets eventu- ally. So stay tuned – that correction is on its way, we are currently witnessing a bull market by name only. There clearly seems to be far greater risk than opportunity in US stocks at the moment yet the Fed keeps on telling everyone that things are going fine. What remains clearly evident in all of this is that at the end of the day, the Fed had no choice but to raise rates to save face and to prove to itself and the rest of the world that it is still relevant. So where do we go from here? The Fed and inTeresT raTes For starters, could the above arguments finally represent the canary in the coal mine for the US economy? Are we heading on a one-way ticket towards a recession? If yes, then how will the US dollar per- form in light of the incoming perceived recessionary market dynamics? The cur- rent argument is that with already the third-longest sustained greenback rally since 1971, the US currency is projected to strengthen versus most major curren- cies. That outlook is backed by the Fed's stated intent to continue raising interest rates on four different occasions in 2016 while peers in the rest of the world keep them flat or lower. Many don't think the Fed will do that. But once again, will the Fed really raise rates in light of an incoming eco- nomic slowdown? The current US dollar rally kicked off in 2013 when the Fed began tapering its extraordinary monetary stimulus, termed Quantitative Easing I, II and III, put in place since the 2007-2009 recession. This then followed with specu- lation of higher incoming interest rates in the near future. That caused the US dollar to strengthen because it meant investors would be paid more to keep money in dol- lars compared with other currencies. With its historic inverse correlation to the price of gold, it also meant incoming lower gold prices. Then where is the price of gold heading in 2016? Where else, it's all rela- tive and really dependent upon the Fed. In light of the recent sell-off of equi- ties during the two first weeks of trading in 2016, one would think that the Fed will not be raising rates in the expected March meeting and might push the continuation of the lift-off further down the line. Or

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