No. 6: The ISM manufacturing survey had its worst fall since 1984, from 60.4 to 53.5.
OK, but 53.5 still represents growth! ISM Chairman Bradley Holcomb said that historical readings of 53.5 correspond to a real GDP growth rate of 3.8%. Besides, 1984 was a great time to invest! It was the third year of a big bull market after a “lost decade” of no stock gains, just like now: 1984 was just the start of a big bull market.
Bonus fact: The ISM services index rose from 52.8 in April to 54.6 in May. The service sector is more important: It accounts for about 75% of all U.S. economic activity and 80% of all U.S. jobs. Fully 16 of the 18 service sectors tracked by ISM reported growth. Anthony Nieves, the ISM survey’s director, said that “respondents’ comments are mostly positive about overall business conditions!”
No. 7: The Case-Shiller housing index fell sharply.
This survey is limited to 20 big urban areas. Besides, declining home prices means a rise in home affordability. The National Association of Home Builders’ Housing Opportunity Index shows that families earning the national median income ($64,400) can now afford 75% of homes sold last month, up from only 40.4% affordability at the 2006 bubble peak. In addition, with the U.S. dollar down, more foreigners can buy homes in cheaper U.S. dollars. The United States also enjoys more immigration than any other land, providing a market for those millions of cheap homes.
No. 8: Only 54,000 net new jobs were created in April.
But the dead hand of government is shrinking, with 29,000 fewer government jobs, so the private sector actually created 83,000 jobs in May. In addition, many of these job losses were due to weather disasters, including the shortage of auto parts from Japan. There will likely be outsized job gains in the second half of this year. (Job growth is a lagging indicator.)
No. 9: The budget deficit is growing.
Yes, but let’s at least be thankful that there are no new stimulus (spending) packages. Nobody is talking about new spending these days, even though they disagree about what programs to cut. That’s some sort of progress. First, you go “cold turkey,” then you make your amends.
No. 10: “Hurricane season has begun.”
CNBC had a countdown clock to hurricane season. But if you look at the history of the 35 worst hurricanes to hit Florida in the last 160 years, only one came before mid-August. Of the 32 Category 5 hurricanes to hit America since 1924, none has hit before mid-August.
After hurricanes Katrina, Rita and Wilma in 2005, we were told hurricanes would get worse each year, but hurricane seasons have been relatively benign the last five years, despite greater tornado activity.
So, please, before you go freaking out about the next bad market headline, take a moment to put it in perspective.