Recently, I have started feeling as if the global economic “recovery” is a state of mind reminiscent of untreated schizophrenia. Those of you familiar with this disorder understand that one symptom of this disorder is an inexplicable shift in behavior from normal to, well, abnormal, and visa-versa. For example, read the quote below and then remember the headline news from May and June.
BRUSSELS (AFP) – Business and consumer confidence in the 16-nation euro zone jumped in July to its highest level in more than two years, driven by regional powerhouse Germany, the European Union said Thursday.
How can this be? Just in May, the euro plummeted, some suggested the euro zone was collapsing, European sovereign debt and the “likely” default of Greece dominated the headlines. Pundits everywhere chimed in with their dire predictions. In two months, all of this has gone away in Europe? In two months, the patient went from moribund to alive and kicking?
Okay, so now we have the U.S. consumer confidence report that just came out. This is not pretty.
Consumers’ assessment of current conditions was more downbeat in July. Those saying conditions are “bad” increased to 43.6 percent from 41.0 percent, however, those saying business conditions are “good” increased to 9.0 percent from 8.4 percent. Consumers’ appraisal of the job market was also more negative. Those claiming jobs are “hard to get” increased to 45.8 percent from 43.5 percent, while those saying jobs are “plentiful” remained unchanged at 4.3 percent.
Compare this to the fact that two-thirds of businesses reporting earnings so far have met or beat expectations, that many businesses raised their earnings guidance for Q3, and that the CEOs of some of the largest multi-national corporations are telling us the economic situation in the U.S. and globally is improving. In fact, the CEO of Panera Bread, a high-priced bakery-café, said that his company plans to hire 25,000 people this year because business is booming. If things are so bad, how is that lots of people can afford a $7 sandwich?
Where is the disconnect? What or who are we to believe? Well, it really doesn’t matter, now does it? The only indicator that matters to us is the market itself, yet this indicator is more reminiscent of untreated schizophrenia than the global recovery.
Given all this, one might think we are tumbling around like river rocks in a fast moving stream. Well, the metaphor is accurate, but one does have to ask – is it the movement of the stream causing the tumbling, or is some other agitator at work?
Trade in the day; invest in your life …
