Don’t Look Now But Economic Data Are Disappointing Again!
In a recent Wealth Watch article , I asked: Has the S&P 500 index gone up “too far, too fast” recently? And are we in store for a correction now that markets have notched new highs?
Here’s my take…
Most of the indicators of market breadth and volume I watch closely are sending bullish signals right now.
In fact, the Dow Jones Transportation Average broke out to new highs last week, as well as the Dow Jones Industrial Average. And both groups of stocks are moving in sync to the upside, which means a renewed Dow Theory buy signal.
Also, from a historical perspective, the stock market has just entered the seasonal sweet spot of performance. November and December are the best two months of the year and the start of the strongest six-month period for stocks.
However, a few things do still have me concerned about the longevity of this rally. Most notably, the dismal economic data.
As you can see in the chart above, the Citigroup Economic Surprise Index is declining again. This means there have been fewer good economic data reports out recently compared with bad ones.
The index is perilously close to the zero line, which, if crossed to the downside, might cause stocks to struggle. They have in the past when this index falls into negative territory.
Economic data were lousy last week. Fifteen of the 20 U.S. economic reports released came in below expectations compared with the previous period. Manufacturing data, service sector activity, job openings and productivity were all worse than expected.
This helped fuel the downside move in the index above.
Bottom line: It’s NOT time to hit the panic button over the recent string of disappointing data on the U.S. economy.
After all, a slowdown was widely expected due to the ongoing trade tensions, among other things. What we need now, however, is a strong upturn for incoming economic data soon. Otherwise these bad data could start to weigh down the stock market.
More on this as things develop.
Here’s to growing your wealth,