Economic outlook still cloudy, earnings don't reflect economic stats
Unemployment rate now below 8%, housing starts up considerably, and consumer spending on the upswing - that's what the recent economic numbers have shown. Sounds good, headed in the right direction.
Corporate earnings season is producing some results that are less encouraging. Bellweathers like Google, Microsoft, General Electric, McDonalds, and Morgan Stanley, among others, reported results that disappointed investors. Even smaller superstar Chipotle has fallen off a cliff.
What conclusion can come from these disparate events. The stock market is dealing with this issue today. There are certain facts to consider. Unemployment stats are improving but the majority of the new employees are in the lower paying segment, lower pay than they previously had or lower pay than they need to live at all prosperously. Housing starts are up, but it is only the higher end segment that is close to robust, that and multi-family residences that are bought by the higher end segment and rented out as investment properties to those who can't afford or can't qualify for enough credit to buy their own house. The increase in consumer spending is a little bit of a mystery here but of course there is no economist in the house. Part of it is presumably by necessity, gasoline prices; given the average age of many vehicles now(12 years on average) the deals on cars now may be proving irresistable and necesssary; and part may the beginning of stocking up for Christmas, a huge part of life for many families.
One wild card in all of this that will soon be resolved is the election. The talk about the economy in the debates and in advertising may work well to garner votes, but a pretty picture is not being painted by either side. Where does confidence come from. The candidates don't have any magic, and a catalyst for a break out from this sluggish economy is not apparent.
The good news is that they never are. Whenever we have a real resurgance it will not be micromanaged by politicians or pre-ordained by economists. Most of us will know when and if it happens and not before.
Corporate earnings season is producing some results that are less encouraging. Bellweathers like Google, Microsoft, General Electric, McDonalds, and Morgan Stanley, among others, reported results that disappointed investors. Even smaller superstar Chipotle has fallen off a cliff.
What conclusion can come from these disparate events. The stock market is dealing with this issue today. There are certain facts to consider. Unemployment stats are improving but the majority of the new employees are in the lower paying segment, lower pay than they previously had or lower pay than they need to live at all prosperously. Housing starts are up, but it is only the higher end segment that is close to robust, that and multi-family residences that are bought by the higher end segment and rented out as investment properties to those who can't afford or can't qualify for enough credit to buy their own house. The increase in consumer spending is a little bit of a mystery here but of course there is no economist in the house. Part of it is presumably by necessity, gasoline prices; given the average age of many vehicles now(12 years on average) the deals on cars now may be proving irresistable and necesssary; and part may the beginning of stocking up for Christmas, a huge part of life for many families.
One wild card in all of this that will soon be resolved is the election. The talk about the economy in the debates and in advertising may work well to garner votes, but a pretty picture is not being painted by either side. Where does confidence come from. The candidates don't have any magic, and a catalyst for a break out from this sluggish economy is not apparent.
The good news is that they never are. Whenever we have a real resurgance it will not be micromanaged by politicians or pre-ordained by economists. Most of us will know when and if it happens and not before.
posted by John Borden at 1:35 PM
0 Comments:
Post a Comment
<< Home