I like the feel of the market this morning. It could easily reverse, but the opening felt right, given the unemployment numbers and the data from the auto industry. Aside from that, though, I sense a non-committed market is what we can expect for a few weeks, especially when the breathless media keeps supporting the “make money predicting bad news” crowd.
- The eleventh hour deal reached to avert the fiscal cliff in the U.S. merely masks the bleak long-term outlook for the country, Nouriel Roubini said in an opinion piece published in the Financial Times newspaper on Thursday. In the piece, Roubini said the fiscal adjustment would translate as a drag on the economy during the year, warning “the U.S. could quite easily come perilously close to stall speed this year” or worse if the euro zone begins to unravel once again.
Run for the hills, The Great Roubini has spoken, again, and again, and someday he will be right again about his dire future, but today or this year is not the time.
- U.S. auto sales rose 9 percent in December, led by foreign manufacturers, capping off the best year for the industry since before the recession began in 2007. The year’s sales were driven by a slowly recovering economy, more available credit, and the need for consumers and businesses to replace aging cars and trucks.
As long as consumers keep buying big things and banks keep lending for the big purchases, the economy will chug along. But what about US debt, a dysfunctional US government, the Fed’s policies, and Europe, you ask? Have faith, just as the market has faith. If it didn’t, Dr. Roubini’s words would mean everything and positive fundamental economic data would mean nothing.
- Tentative signs the euro zone may have passed the worst of its downturn emerged in December.
- European banks will get more time to build up cash buffers to protect against market shocks under a rule change that could help free up credit for struggling economies.
The fact of the matter is the largest impediment to the market’s forward movement is not the US government, the US debt, the Fed, or Europe. Those things will eventually work out. The larger issue is the constant underlying conservatism of business and consumers. When both feel uncertain or anxious about the future, each tends to pull in. When both feel positive about the future, each tends to step out. Currently, we have some pulling in and some stepping out and the market understands this, as it is, after all, a combination of both consumers and business.
The point here is that the market is simply reflecting the anxious reality of consumers and business, so if you believe, as I do, that the overt issues will get fixed, then you should see the current market state as a trading and investment opportunity. Now is the time to take advantage of the up and down movement. Now is the time to make your money work.
So, when the likes of Dr. Doom scream from the hilltops that the sky is falling, ignore them and turn to the data. You will never go wrong with the economic fundamentals because if there is one certainty in the market it is this – the market likes to see consumers spending and business making money. If those two things are happening (and they are), the market will not run for the hills, no matter who is shouting from the top of those hills.
Trade in the day; Invest in your life …
