ISIS captures large swaths of Iraqi territory; Russia continues its power grab in Ukraine, intimidating its neighbors by threat of force; jobs created in August declined from an expected 225,000 to 142,000 and U.S. markets soar ever higher despite unending chaos abroad and economic issues here at home.
Is this the newest new normal?
Well for now, it sure seems to be. Despite international and domestic events, the Appleton Group and clearTREND® research shows that markets continue trending higher. During the first eight months of the year, the S&P 500 and the Dow have powered to all-time highs. The Fed also continues to stimulate, although at a slowing pace, supporting this unprecedented five-year bull market.
Yet there has been much evidence to suggest the markets are showing us a very different picture than U.S. economic health would suggest. Recently, former Fed chairman Alan Greenspan outlined nine points on why he thinks the economy “stinks.” One of the most important is the lack of long-term confidence in America’s political and economic systems. He stated that since World War II, every recovery, except the current one, has been led by the construction sector. This shows that investors seem hesitant to invest in assets they see as long-term and illiquid. Worry like this stunts future growth.
And even if the average investor wanted to put money to work in the market, they increasingly have less ability to do so. Median household incomes have fallen from $52,000 to $47,000 since the recession, bolstered by the creation of low-quality, part-time jobs.
clearTREND research produced by Appleton Group indicates upward trends in small, mid and large cap domestic equities. Our U.S. Economic Health Index™ still indicates that 77 percent of U.S. sectors are expanding, albeit down from 81 percent last month. “Since negative news doesn’t always lead to negative returns in the markets, it’s important not to make financial decisions based on your emotional reaction to what you see in the news,” says Alex Haas, advisor to private clients and retirement plans. “‘News’ can often be synonymous with ‘noise’.”
Click here to view this month’s economic data in our digital issue.