Perspective.
The deadly bombings in Boston last week, along with a spate of senseless killings in Newtown and Aurora, should highlight for those consumed by economics and financial market statistics the fragility of life and a sense of perspective about helping those in need at their darkest hour. How noble that on the day of the U.S. equity market’s most damaging point collapse in years, our focus was on Boston and not on our wallets or portfolios.
My view is that most of us look for a “glass half full” approach to life. It scares us to think of the enormity of problems we encounter in our lives, so we have to prioritize the real meaning of things, such as good health, family, and psychological peace of mind.
Global hunger, poverty, political and religious strife sets in motion not only a kaleidoscope of pessimism and fear, but an opportunity for us to respond and cope aggressively. In that regard, the most obvious hazard we face is how we react to the exigencies of life.
Forge ahead.
Within that backdrop, I find it hard to change horses in midstream and declare, as a result of last week’s “points gyration” that the fundamentals of our nascent economic spurt have abated. There may be soft patches and missteps along the way, but the glass is filling, according to relative strength integers that define this period. Nominal earnings forecasts suggest that the consumer is coming out of his spending shell, albeit modestly, and that weaknesses in policy are being addressed, particularly at the local level. Corporate capital expenditures are nowhere near pre-recession levels but are picking up in selected sectors, such as housing and technology. A reluctance to invest beyond the next quarterly reporting period is finally abating.
A broader trend is also emerging as equities move with greater synchronicity. This might be a function of “all boats” being lifted by the capital tide, but it also might suggest a wider diversity of capital gains opportunity and corporate entrepreneurship globally. Either way, the “old” patterns of investing and delivering services to the public are changing the corporate bottom line.
Don’t trip.
My optimism does not necessarily rule out another points calamity like Monday. It merely suggests that the longer-term trendlines are slowly modifying their level of ascent. The markets are always at the mercy of quarterly, and daily, reports. But the axis of performance changes subtlety and finally I see the emergence of patterns that might work in our favor.
Some of those patterns include trade, employment, and overall government willingness to address financial matters. The fiscal debates are contentious, but having the debate is a good place to start. While the policy makers have so far been the impediment to progress, the former two trends are going to put pressure on the debate to ameliorate any embedded disfunction. Either way, business momentum will not stop if the consumer first gets a head of steam and a little bit of confidence back.
Overall, market valuation will advance and recede during the coming months, but the aggregate total should be “in the black” if we show no signs of derailing initial efforts to establish new, potential upside benchmarks.
At this juncture, the only cause for a reversal in market performance trends would be we, ourselves, and a fear of following through on the initiatives that need to be addressed. A muted, but positive, outlook is indicated.
Scotty C. George
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The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and it accuracy cannot be guaranteed. It is intended for private informational purposes only. Any opinions expressed are subject to change without notice. Du Pasquier Asset Management and its affiliated companies and/or individuals may from time to time own or have positions in the securities or contrary to the recommendation discussed herein.
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