I am liking the market vibe this morning. Finally, my sense is that the market is shrugging off the crazy and paying attention to the sane. Sure, Syria, foolish politicos, and QE tapering nonsense will push the market around here and there, but it seems the market is now paying attention to the fundamentals more than subscribing to the tenor of fear. Witness the market the last five days.
Volatility has moved within the market, true, but at the end of the day, the market this morning is higher than it was five days ago. The reason is simple. The market tires of Chicken Little, especially when the sky does not fall. So, when “bad” news no longer plays, the market turns to the economic fundamentals, and those are getting better on a global scale.
- US imports of goods and services rose 1.6 percent to $228.6 billion. Imports of autos, parts and engines were the highest on record in July.
- Canada’s trade deficit in July more than doubled to C$931 million ($887 million) from June as imports rose by 0.6 percent and exports fell by the same amount.
True, every country would like a trade surplus, but that just cannot happen. Someone has to take it on the chin. The US and Canada have been taking it on the chin for some time, but that is because their consumers like foreign goods and services. As time goes on this will change in the US, as the national policy is now slanted toward increasing exports (China is going the other way), and in the last six years, the US has made tremendous progress in this area because more exports equals more jobs.
And, this is exactly what is beginning to happen in Europe – exports are increasing which will lead to more jobs. I know this for two reasons. First, the US and Canada are buying more Eurozone goods and services. Second, Eurostat told me.
- A bounce in exports and spending pulled the euro zone out of recession in the second quarter of 2013, data shows, in the first signs of recovery after the bloc’s longest slump.
- Stronger-than-expected growth from Germany to Portugal helped the bloc’s economy expand 0.3 percent in the April-to-June period, the European Union’s statistics office Eurostat said on Wednesday.
Spain two days ago and now Portugal both showing signs of economic recovery. How weird is that? These are two of the five economic basket cases created when the politicos thought bleeding the patient with leeches would cure them. Sure, it might help draw toxins from blood, but if it goes on too long, the patient will die. Fortunately, wiser economic heads prevailed and the patient is now healing.
- Exports to the rest of the world rose sharply in the quarter after six months of falling sales, while government spending made its first positive contribution to the economy since late 2009 when Greece plunged the euro zone into its debt crisis.
Budget deficits need to be reined in, but they should be accompanied by targeted and prudent government stimulative spending.
- Eurostat’s breakdown highlighted the softening of the austerity policies that many economists blame for worsening the euro zone’s 1-1/2 year-long recession. That was accompanied by the first quarterly rise in household spending since late 2011.
Anyway, my takeaway is this – Europe is coming out of its recession and the market likes this mucho. In fact, it likes it more than it fears QE tapering or Syria. In fact, if this keeps up (the global economic fundamentals keep improving), the market just might take back its record highs sooner rather than later.
- Chrysler Group LLC reported a 12 percent gain in U.S. August auto sales and predicted that the industry will continue on its hot streak as it heads into the fall selling season, when new models are introduced.
The US consumer just keeps on ticking and the economic news just keeps on coming. Okay, okay, I need to pull back on the euphoric writing. A couple of green days in the market does not a rally make. But, the good days do help frame a reality – despite a weak August, the market has resilience and it does pay attention to the economic fundamentals, which, in the end, will rule the day.
Trade in the day; Invest in your life …
