Equity markets have pulled back 8% from their mid-May highs based on Fed Chairman Bernanke’s hint that an end to our near zero-interest-rate climate may be at hand.
But the worst may be yet to come. Employers are starting to get serious about how they’re going to prepare for Obamacare next year. Health insurers are telling them to expect anywhere from a 25% increase – to a full doubling of healthcare costs – or more, leaving employers with three bad choices:
- Absorb the cost increase. This will mean more layoffs (higher unemployment) and/or lower earnings, which mean lower stock prices
- Reduce the workforce to less than 50 employees – exempting them from the Obamacare Rules
- Reduce workers hours to under 30 – so they’re not “full time” which also exempts them from the cost of Obamacare
It’s the latest government manufactured bubble – and no matter which option employers choose – expect lower corporate profits, lower wage-earnings, and higher unemployment – all of which spell disaster for the economy and for the stock market.
Youth unemployment – already at record levels – will get considerably worse. Who’s going to hire an expensive, inexperienced, full-time college grad when the healthcare implications alone are so onerous? Junior might be living in the basement a bit longer than anticipated.
We haven’t had a really bad market since 2008-9, but if you lived through that – you know how devastating it was – and that it’s taken a full 5 years just to claw our way back to even.
Protect your money from downside risk (the way we do), and be prepared to ride out another rough patch.