The Economy and The Market

I believe the US economy is slowing along with the economies of the rest of the world. Austerity across the world will weigh on economic growth along with the end of the inventory rebuild and the end of QE II. The decoupling argument is wishful thinking at best.

A slowdown will only effect markets if it effects corporate profits. Thus far corporate profits have held up but at some point they will take a hit. The extent of the slowdown will dictate the effect on corporate profits. I am uncertain if we will be able to muddle through or if it will be worse.

I don't believe paying up for stocks is  a good idea in the current environment. At the same time I don't believe the bears will be rewarded until corporate profits are effected. I believe the best course of action is to buy pessimism and sell optimism.

 

 

6 comments:

Anonymous said...

I disagree.  Markets are never wrong and a real slowdown would have corrected markets more than the measly dip we've had to date.  Funny.. you'll see once we get positive data on payrolls, killer earnings, China stops cutting rates and starts consuming like rabid pigs again all a sudden the talking heads will flip and say the economy is as strong as it's ever been.

Anonymous said...

correction: raising rates

Anonymous said...

Please review the use of the words effect and affect.

Tsachy Mishal said...

Correct me if my memory is wrong but werent you singing a completely different tune a couple of weeks back? What was the market saying when we were 7% lower? If I were to say the market is always right than I would be selling low (ie: 2 weeks ago) and buying high (ie: yesterday)

Anonymous said...

Yes and I was wrong.  The market doesn't lie.

Anonymous said...

And the market correcting 7% and ripping to new highs is saying the soft patch is transitory.