http://mexicanoccupation.blogspot.com/2013/02/stock-market-bubble-obama-and-his.html
Is the Stock Market Clueless or
Disconnected?
By
Matt Nesto
It's
nothing new that Wall Street's reaction to certain events is sometimes
baffling, but there's a sentiment right now that there's a certain disconnect
between the stock market and general economic conditions.
A
recent example is the rally that came after the January jobs data, which saw
the unemployment number rise and might have been dubbed an outright disaster
had it not been for a series of sweeping revisions that made the trailing data
look a little better. And yet, stocks rallied on the news and investors pushed
the Dow about 14,000.
There
are other examples, but the fact remains that Wall Street is aiming at the
clouds and not bothering with the mud beneath its feet.
"There's
a simple reason stocks are going up higher: it's because the Fed says so,"
spouts Dan North, chief economist at Euler Hermes, in the attached video. While
consumer inflation remains low, he says asset inflation is soaring. "If
you look at stocks, bond yields, gold has doubled since QE1 started. Silver has
almost tripled." This all coming at a time when unemployment, housing and
real GDP growth have been missing.
Political
risk has all but disappeared lately, with stocks posting their best January
advance in over a decade. Even earnings, while (predictably) coming in ahead of
much-lowered analyst expectations, are facing a disconnect as profit growth
slumps and various valuation measures tilt towards the expensive column.
There
are other examples of this disconnect, as well as some positive reasons why
stocks are performing as well as they are, but the overriding rift is
undebatable, especially when markets are back to pre-recession levels and
economic progress is still in low gear.
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