We’ve seen a bit of excitement here in New York City, and I’m not talking about the plane that just skidded off the runway at La Guardia in last week’s snowstorm. Many market indices have set new records, and the Nasdaq finally crossed 5000 again last week — which means absolutely nothing, except that it’s a big-round-number.
Forget all the posturing around big round numbers and commentaries on how the Nasdaq is in a bubble. It’s not. The Nasdaq is made up of companies that — unlike in 2000, during the heyday of stocks like JDS Uniphase Corp (NASDAQ:JDSU) — pay dividends and are selling at robust but hardly astronomical multiples of earnings.
Note that I said they have earnings, which many of the high-flyers of the dot-com age did not.
Let’s get down to what’s important and what’s right or wrong in the economy. For instance, the recent revision for Q4 GDP (we’ll get a final number later this month) showed an economy slowing dramatically in the final three months of the year, from an initial read of 2.6% growth to a more sedate 2.2% pace.
This contrasts with the strong Q2 and Q3 growth averaging 4.8%. That was a bit of a surprise, but then again, no one said we were off to the races after the fall, unless they were simply looking for 15 minutes of fame.
And while February’s manufacturing survey suggested slightly weaker sentiment among those who make things, the service side of the ledger came in with another nice gain, well into expansion territory, after up and down results in the final months of 2014. What sparked this were solid gains in employment, which was a bit of a surprise given the nasty weather in February.
On Friday, the Bureau of Labor Statistics reported that employers added 295,000 workers in February.
That’s not all. Incomes are rising at a steady rate month after month, with January’s data continuing the trend. Savings are also rising, and spending has now fallen for two months in a row.
Is this another winter of discontent, with consumers staying inside and playing with holiday gifts rather than running out and buying new ones or shopping online?
Actually, no. Just blame energy prices. Take them out of the equation, and, voila, spending continues to rise at a slow but reasonable pace.
Editor Dan Wiener and Research Director Jeffrey DeMaso publish The Independent Adviser for Vanguard Investors, an award-winning monthly advisory letter that keeps subscribers abreast of recent developments at Vanguard, and provides long-term guidance for investing in the Vanguard fund family.
