Analyzing various data series with an eye on tenths of a percent is getting down to the bone. Change in momentum is the name of the game.
Before any pivotal series can reverse trend, the norm is to see a change in momentum from a previous trend, whether up or down. I just completed my monthly scan of the leading, coincident and lagging economic indicators, which, when dissected one against the other, offer excellent long-term guidance on the health of our economy.
“Buzzing” is the word that aptly describes current conditions. Not smoking, but certainly buzzing. The last single (no double) monthly decline in the leaders was the revised negative 0.1% decline logged in January 2014, and a later revision could wipe out this mini negative.
Although both the leaders and economic indicators continue to track positively, there has been some lost momentum in recent months. As I’ve noted often, the employment data is in the winter of its cycle, and there is little likelihood that the jobless claims series can offer much better readings. The average workweek indicator is about as strong as it gets in any recovery cycle.
Yet now, in the winter of an economic cycle, the Federal Reserve is looking to raise interest rates. If the Federal Reserve times the first uptick in the Fed funds rate just right, it may be able to hit the actual peak in the economic recovery cycle or that point at which the Fed would historically be getting ready to begin cutting interest rates.
What a disaster. The Fed should have altered course a couple of years ago. But no, the Fed, with its low interest rate policy, has continued to let retired grandpa and grandma subsidize Wall Street, corporate America and big government. Some strategy!
So, as long as the economy continues to buzz along and the Fed does not run wild with interest rates, the stock market will find reason to advance. A whiff of a turn to recession, and the party will end fast.
Here are four stocks with charts that look plenty strong in current market conditions: