Gold is up, oil is up, the dollar is down, as is the VIX, and, hey, guess what? The market is up. Why is the market up? My best guess is because is because it is Wednesday. No. I take that back. It is up because today’s date is an even number of an even month. No? Then, how about the market is up because it wants to go up?
- The S&P 500 has climbed just 1 percent in 2015 after double-digit surges in each of the last three years, as investors try to interpret signs of economic growth. To some money managers, improving data will translate to more earnings growth, while others see it catalyzing a series of Fed rate hikes that may lessen the appeal of stocks.
Yes, that just about sums up the conundrum, but, in the end, the market always wants to go up when the data is good, and, yes, the leading data is looking better and better.
- Job openings, a measure of labor demand, rose 5.2 percent to a seasonally adjusted 5.4 million in April, the highest level since the series began in December 2000.
The highest level since 2000? If I am not mistaken, that is 15 years ago, which means there are more job openings now than there were at the height of the last economic cycle, you remember, the one before the Great Recession and the disastrous financial collapse.
- U.S. job openings surged to a record high in April and small business confidence perked up in May, suggesting the economy was regaining speed after stumbling at the start of the year.
Another good leading example of future economic activity is small-business confidence. Don’t forget, small businesses in the USA are in fact, big business, when it comes to the US economy. Here are just a few facts.
- The 28 million small businesses in America account for 54% of all U.S. sales.
- Small businesses provide 55% of all jobs and 66% of all net new jobs since the 1970s.
- The 600,000 plus franchised small businesses in the U.S. account for 40% of all retail sales and provide jobs for some 8 million people.
- The small business sector in America occupies 30-50% of all commercial space, an estimated 20-34 billion square feet.
I love this stuff, this learning about things, but that is just personal, so, back to the market.
- The economy’s stronger tone was reinforced by other data on Tuesday showing a solid rise in wholesale inventories in April, in part as oil prices stabilized.
Somebody is expecting a big break out from the US consumer; rather, a whole bunch of businesses are expecting a big breakout from the US consumer, or so it seems, and this, I suspect, makes the market want to go up.
I mentioned a boogey man a couple of weeks ago, and that was the huge debt American businesses have taken on. Back then, I said we should keep an eye on this. Here is another take on that same subject, and I have the same response. Keep your eye on this.
- The size of the U.S. corporate-bond market has ballooned by $3.7 trillion during the past decade, yet almost all of that growth is concentrated in the hands of three types of buyers: mutual funds, foreign investors and insurance companies, according to Citigroup.
- That combination could lead to more selling than the market can absorb when the Federal Reserve raises interest rates for the first time since 2006.
Now, the fact there is so much corporate debt is important, but I do question the importance of the other fact above – that so much debt is held by just three entities. That fact is always alarming when it comes to the market, but, in the case of these three, not so much.
Each of these three tends to be long-term investors, which means, they see through the mania of the moment, the breathless media selling fear, and the talking heads spouting off. True, they will adjust their portfolios to match their future view when rates do go up, but I just don’t see a wholesale sell-off of equites because interest rates tick up a quarter of one percent, especially in light of the US economy picking up steam, again.
I just peeked. The market is still up …
Trade in the day; invest in your life …
