One thing to understand about the market is that it is always forward looking, until it is not. Although my status in life comes nowhere near that of celebrity, the statement I just wrote represents the quality hedging of celebrity analysts.
The fact is the market is a forward looking entity, as traders and investors like to get their money in on what will happen. Like surfers, they want to catch the wave just at the right moment, so they watch for the waves forming on the outside and they care little for the soupy mess rolling onto the beach; yet when the market is restive on low volume, and traders can force the action, such as now, this summer, the market might well take yesterday’s news and run with it.
- The third and final estimate for Q1’a GDP rolled in at -2.9% this morning, which was even worse than the expected drop of 1.8%, It’s also worse than May’s second estimate of only a 1.0% drop in GDP levels. What a disaster.
It would appear the market digested the above news overnight and then had a reaction to it this morning. Just after opening, the Dow sunk to negative 120 and the S&P took a dive to 1950. Then again, maybe the panting of the breathless media regarding US consumer spending in May set the market back this morning. After all, it is easy to project forward when you have the media explaining the data.
- U.S. consumer spending rose less than expected in May, likely held back by weak healthcare spending, which could prompt economists to temper their second-quarter growth estimates.
Funny thing about data, though. It is like a coin. If you like one side over the other, than that is the side you show.
- Profit estimates for healthcare companies for 2014 have jumped from up 8.3 percent at the start of January to up 12.2 percent now.
So here is a question, a legitimate question. No, really, it has merit. If US consumer spending in May was held back by weak spending on healthcare, how is it that healthcare companies are raising, yes, I said raising their profit estimates 25% for the second half of 2014? Am I wrong to suggest this is a reasonable question? Oh! One more little thing, a tiny thing, really.
If “weak healthcare spending” in May “could prompt economists to temper their second-quarter growth estimates,” then how will they account for the increased profit estimates of healthcare companies in their projections? I guess they could argue healthcare-profit estimates are rising because healthcare companies are cutting costs. They could, but they would be wrong.
- U.S. healthcare companies are winning higher profit forecasts, bucking a wider trend on Wall Street, as pricey new biotech drugs hit the market and insurance enrollment rises under the Affordable Care Act.
The fact is more people than ever have access to healthcare, which means more revenue for everyone in the business. Insurers to pharmacists and every provider, supplier, and manufacturer in between are now and will be pulling in much more revenue. Yes, it is as simple as that.
So, the market must see the “weak” consumer spending in May (up again, by the way) is just the side of the coin the breathless media wants to show, right? And it must see the coming wave is much more appealing than the soupy mess heading onto the beach, yes?
Of course it does, and that is reason one should see the current market for what it is – traders forcing the action in a restive market.
- Personal Incomes were above expectations while Personal Spending was half the consensus estimate.
Incomes are rising, consumers are spending, both the manufacturing and services sectors are jumping higher, employment is steadily improving, corporations are spending money to grow, businesses in general are spending money on themselves, and consumer confidence is moving up. If I am right, and I am, then the forward looking market will react to this reality sooner rather than later. In the meantime, we will see volatility as the market, like water, seeks balance.
Interestingly, this morning, I looked the market first around 6:45, and then I started reading. I came across the sentence below, an opening to an article.
- Things are fairly quiet in the early going on this fine Thursday morning.
Things can change quickly in the market, and herein rests a problem for timely writing about the market. Yes, it is true, for the first fifteen minutes after the market opened this morning, things seemed fairly quiet, and then the breathless media did its thing …
Trade in the day; invest in your life …
