Hard to believe 2011 is almost finished, yet there seems to be so much left before the clock strikes midnight on Dec 31st. If I were to describe this as a turbulent year that would be an understatement. World events have dominated the news, emotions swung on the pendulum of fear to greed. Markets are still trying to sort it out but the issues from abroad will eventually be settled. Our economy is showing some strength (see below) and while employment is a major disappointment with some growth in the economy this may NOW be the moment to get people back to work; let’s hope we don’t miss this chance.
With the uncertainty from DC, Europe and other parts of the World are storm clouds brewing? Should we be more cautious than usual?
I’m sick and tired of it. What you may ask? The macro news has been filling the slot each and every day – twists and turns to make one feel ill. No wonder the VIX hovers around 30, protection being bought with every piece of bad news. I realize there is no way to make the ECB, EU and whoever is running the show across the pond to actually do the right thing, but clearly they are bungling an opportunity to calm everyone down. I suspect at some point they will ‘get it’, but will we spoil a great opportunity?
The US economy is showing some resilience now and with some slack in certain areas, tightness in others there is a nice balance for extending growth into 2012. The following is a list of some anecdotal and true evidence I have seen to support my view. While I realize the stock market is not the economy the strength of the market ex macro issues should start to come through.
- improved industrial production – 3 months running
- better retail sales than expected and trending higher into the holidays
- marked improvement in jobless claims – falling
- better sentiment among corporations, executives about future business
- far less inflation than anyone believes – it’s coming down
- stronger export pricing than expect, lower import prices (hence, no inflation)
- solid productivity numbers 2 of last 3 quarters
- highly accommodative fed that will act at a moment’s notice
- verbal evidence of smooth sailing in several sectors, including industrials, retail, manufacturing, energy/discovery/services, oil, exports
- surprising strength 2 straight months in housing
- Caterpillar building 9 new plants in China, making acquisitions and hiring here and abroad
- Retailers by and large expecting a very strong holiday shopping season
- resurgence in auto industry with strong demand here and overseas
- rail cars filled and shipping – fedex and ups moving goods and expecting the best holiday delivery season ever
- coal supplies near five year lows, China demand still robust
- low rates – for borrowing by corporations, small biz and consumers
This list is not complete, I’m sure I missed a few areas but clearly this is not the end of a business cycle.
Category: Market Commentary