It appears we are back to the days of the market wanting to go up, struggling with the latest news, but no longer running away. True, nothing is certain in life, save death and taxes (ouch – just got that one done … the latter that is), but as it stands now, the market is flirting with all-time highs, again.
Perhaps the floating rumors about the Fed not raising rates until 2016, or, at the earliest, the end of this year, are buoying the market. Then again, earnings have not been so bad, thus far. Companies are beating generally low expectations, but others are doing much better.
- Goldman Sachs Group Inc. posted the highest earnings per share in more than five years as all of its major businesses topped analysts’ estimates and the firm paid out a smaller portion of revenue to compensate employees.
True, Goldman Sachs and others of the banking ilk should be benefiting from the Fed policies, so, making money should not be a surprise. Then again, the banking ilk should also be on its heels from all the restrictions Dodd-Frank laid on them. Then again, one more time, maybe the Dodd-Frank restrictions were not as bad as the breathless media and its “banking” mouthpieces made them out to be.
Then again, again one more time (really this time), maybe the banking lobbyists managed to get the bill watered down enough such that the “teeth” of the bill are well-rounded molars. Who knows, but the fact remains that Goldman Sachs is making money and lots of it.
The reality is earnings might not be great this past quarter, you know, the strong dollar and a tough winter with the consumer. Oh, man those retail sales last quarters were so bad, right?
- Retail Sales in the United States increased 1.30 percent in March of 2015 over the same month in the previous year.
True, the 1.3% increase was not as good as the previous month increase of 1.9% nor did it equal the high of the last six years of 5% in September of 2014, but it also is not the -11.4% recorded in December of 2008.
Keep in mind, when things are bad and then the economy improves, year-over-year (YOY) increases are higher. As the economy elevates, the YOY increases get smaller and any hit, such as the US economy took last winter, will make a big dent. The same is true for the upside. Expect a bigger rebound in April or May.
- History shows that when times are tough, U.S. consumers increase, rather than decrease, their savings. Plummeting energy prices are providing the extra wherewithal. Investors who anticipated purchasing-power gains would lead to greater consumer spending must be sadly disappointed.
Yet, the breathless media is not letting this bone go. For years in a row now, it pulls out this bone it has buried for the winter and it gnaws on it with great energy in the spring, and, in some cases, it growls loudly as it chews.
- Consumers may be adopting the deflationary mindset that has plagued Japan for two decades. Japanese consumers are trained to wait for still-lower prices before buying. Meanwhile, inventories and excess capacity mount, forcing prices down further.
Seriously? The US economy is headed toward a Japan-style, stagflation period of 20 years or so, and this because US retail sales in March only went up 1.3% YOY, and US consumers banked some of their savings from cheaper gas?
- US Personal Saving Rate is at 5.80%, compared to 5.50% last month and 5.00% last year. This is lower than the long term average of 8.39%.
Okay, so maybe US consumers are not banking as much as the above suggests. Maybe they are paying down debt, which is good right? In February, US consumer debt stood at 1.5% less than all of 2014, even as it increased for longer-term debt.
- Personal income increased $58.6 billion, or 0.4 percent, and disposable personal income (DPI) increased $54.2 billion, in February, according to the Bureau of Economic Analysis.
- In January, personal income increased $61.8 billion, or 0.4 percent, DPI increased $61.5 billion, or 0.5 percent.
Or maybe, it is just as it has been – hard winters hurt employment, hurt retail sales, and even with the extra bank from lower energy prices, the money simply has not found its way into the system, just yet. Ya gotta believe that with employment rising, cheaper gas, and personal income increasing, that money will end up in the retailers hands at some point.
Trade in the day; invest in your life …
