The ‘News’ Isn’t News…
“Once you start down the dark path, forever will it dominate your destiny. Consume you, it will.”
It’s my hunch that the stock market clouds of September are short-term and that we are about half-way through the current pause.
The US economy is barrelling forward as the deep economic and psychological wounds of the shutdown are being addressed and healing.
Trying times in our past have always led to better times ahead.
The patient, disciplined client with a defined wealth management plan will benefit from the reality and underlying current that is unfolding in the coming decades.
Those pushed by impatience, emotionally charged reactions, non-existent planning, poor focus, and fearmongering will look back on the benefits they missed with the pain of deep regret.
America is going to run out of houses.
Homebuilders will have a heyday of demand. The latest record-setting data is just the start. And while economists were forecasting the headline index to come in at a level of 78, the actual reading was five points higher at 83.
Never has the homebuilder sentiment index topped 80, let alone moved as high as 83.
If this sentiment survey were a stock chart, technicians would consider it a textbook breakout:
And as you can see the improvement is nationwide!
It’s not uncommon for me to get messages like, "Mike, the news out there is terrible. Where in the heck do you come off with the idea of things ‘racing forward’?”
Folks, news is not news. It's emotionally charged, attention-grabbing platforms designed to sell advertising and bring you back again for another dose of fear.
Don’t get marketed out of your investment strategy.
Here’s the latest from the NY Fed Manufacturing data (below). And note that New York City may well still be closed for the most part, and the lights are still out on Broadway, but factories across the state are open for business.
In the latest release of the Empire Manufacturing report for the New York region, the headline index of general business conditions rose from 3.7 up to 17.0 which was a full ten points above consensus forecasts.
What's even more encouraging about these readings is that in the case of both current conditions and expectations, the levels for September are higher now than they were pre-COVID.
This is all unfolding despite massively-broadcast concerns that the "running off Federal relief programs" was going to cause "a sharp slowdown in activity."
But that spin hasn’t shown up in the Empire Manufacturing report yet - no Armageddon:
And There’s More Good News
Note below the forthcoming ‘Plans for Capital Expenditures and Technology Spending’.
They also increased in September, continuing the trend we noted from the Q2 GDP data about R&D's massive increases then.
After dropping to their lowest levels since the Financial Crisis earlier this year, the rebound in both these indices has been darn near as swift as the pullback.
The difference? The ugliness and negatives of the fall will be vastly more covered for you in the press than the good recovery.
While current levels are still below where they were pre-COVID, the pace of recovery has never been sharper.
The economy may still be perceived as far from the "old normal" but things have bounced back a lot faster than many were thinking a few months ago.
And when we take off the cover on the "new economy under construction" the speed and tech capacity will be mind-blowing.
In short, retail sales are rallying to new highs.
This economy is doing better than the media would have you believe, because there’s no ad sales associated with headlines telling you all the planes landed safely today.
See the smoothed six-month average below. Not too shabby:
Now have a look at the speed of the current recovery relative to the Great Financial Crisis of 2008-2009:
Look at the facts, not the news.