Courtesy of Pam Martens.
S&P 500 (Green) Versus Goldman Sachs (Orange) Over Past Five Years
By Pam Martens and Russ Martens: September 12, 2016
European and Asian stock markets were firmly in the red overnight as Friday’s 394 rout in the Dow Jones Industrial Average fueled global concerns.
The chart above shows how the Standard and Poor’s 500 Index of the biggest companies in America has, over the past five years, traded relatively in sync with Goldman Sachs (frequently called Government Sachs for the number of its partners it has placed in top money slots in both Democrat and Republican administrations). When there has been divergences in the chart above, the relationship has gravitated back to a converged path after a time. Inevitably, the health of the country’s banks plays a critical role in the health of the overall economy. If one ever doubted that, the Wall Street bank crash in 2008 and cataclysmic economic aftermath ended that debate. (And, yes, Goldman Sachs is now a deposit-taking bank thanks to the repeal of the Glass-Steagall Act.)
The divergence investors have seen this year in big Wall Street banks selling off as the Dow Jones Industrial Average and the S&P 500 regularly set new highs was simply unsustainable. The idea that central banks had become omnipotent Gods and could wave their magic wands to levitate markets was certain to be discredited the moment any daring soul ventured into the room and screamed that the Emperor had no clothes. That message was delivered by not one, but two, daring souls last week. Markets listened – then quickly sold off.
Jeffrey Gundlach, founder and CEO of the Los Angeles-based investment management firm, DoubleLine, made a presentation to investors last Thursday, September 8, suggesting that the Federal Reserve is determined to show that it is not being held hostage by market forces and may hike rates even as markets have become complacent that the Fed won’t raise rates this year.
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