Mark Twain popularized the line that there are three kinds of lies: “lies, damned lies, and statistics.” And Warren Buffett has quipped that “a public-opinion poll is no substitute for thought.” So understandably, investors are reluctant to place too much weight in economic statistics or polls — especially at a time of such market volatility and financial uncertainty.
After all, the only number that really matters is the bottom line of your brokerage account or your 401k.
But just because a number can’t be guaranteed as a 100% accurate measure of the American economy, that doesn’t mean investors should ignore the data points at their disposal — especially when many of those indicators appear to be saying the same thing.
Here are 11 recent facts and figures that appear to be pointing towards sustained economic growth and a bull market that is here to stay:
11. Improving earnings. Of the 290 S&P 500 companies that had reported fourth-quarter earnings as of last week, 236 saw higher EPS than in the previous year’s report. That’s a big number – and worth noting, since there was a lot of bluster about the end of easier year-over-year comparisons now that we are farther removed from the worst of the recession and financial crisis. Also noteworthy is that over 70% of S&P 500 stocks topped Wall Street EPS forecasts in their Q4 earnings.
10. Shipping stocks surge. It’s no secret that there’s a correlation with shipping and freight companies and the broader economy. The more goods moving around, the more consumers are buying and businesses are selling. So consider that rail giants Union Pacific (NYSE: UNP) and CSX (NYSE: CSX) have both significantly outperformed the market in the last 12 months, with the majority of those gains coming since September. And consider that United Parcel Service (NYSE: UPS) is forecasting record 2011 earnings of as much as $4.35 a share, which if achieved would be 22% above last year’s numbers. Those are encouraging signs.
9. Americans using plastic again. Yes, too much debt got us into this mess. But the fact that U.S. consumer borrowing rose in December for a third consecutive month may be a good thing. Why? Because it marked the first increase in credit-card charges in more than two years – and is probably the driving force behind improving holiday sales. What’s more, psychologically consumers are in a better place if they are swiping plastic. That implies they believe they’ll have the cash in a few months to pay off debts. Though whether or not those bills actually get paid is debatable, the change is sentiment is certainly a good sign.
8. Inflation talk. As with credit, inflation isn’t always a bad thing. If you recall, the doomsday scenario economists were discussing in the depths of recession was “deflation,” with horrible parallels drawn between the U.S. and the Japan of the 1990s. While it’s true that runaway inflation would hamper economic recovery and put pressure on fragile consumer spending improvements, it’s also true that a little bit of inflation is a good thing because it keeps people from hoarding cash. Specifically, if HDTV prices are rising, consumers are more apt to by and less apt to wait for a better deal. The tipping point of inflation can and will be debated, but as of right now we appear to be in a good place.
7. Dollar is declining. A weaker dollar boosts American competitiveness with exports. And investors should take note, because a weak dollar also boosts the foreign profits of multinational corporations. For instance, in 2009 when the euro was improving against the dollar, United Technologies (NYSE: UTX) stated that the company adds about $10 million in annual operating income for every penny the euro gains against the dollar. Once again, a declining dollar can be bad if it passing a tipping point, but a moderate weakening of the U.S. currency could help economic growth and many stocks with a global footprint.
Keeping reading for 6 more reasons the bull market is here to stay…