Mesmerized by the parade of naked emperors populating press conferences in Europe, the business media continues its trademark rear view today proclaiming June the best stock market gains since 1999 (infamous peak anyone?). This morning we learn that the US economy contracted (as some of us expected) in June. The Institute for Supply Management’s index fell to 49.7, worse than the most-pessimistic forecast in a Bloomberg News survey, from 53.5 in May. Figures less than 50 signal contraction in the economy as measures of orders, production and export demand dropped to lowest since July 2009.
Central bank injections and bailouts aside, the US now joins a long list of global economies who have entered into contraction, including Europe and most of Asia. This is a fully coupled global economy. Investors who care about protecting their capital have been amply warned.