Latest Economic Data Enough to Keepthe Stock Market Moving Higher?
BySasha Cekerevacfor Investment Contrarians| Jan 30, 2013
One of the stock market’s most perplexing moves for both professional and retailinvestors is when the market, best represented by the S&P 500,moves in a direction that
might be contrary to current conditions regarding economic growth.This is one of the most difficult concepts to understand; that the S&P 500 does notrepresent current economic growth conditions, but what the market believes is highly probable for the future.We have recently witnessed a substantial move upward in the S&P 500, yet only recentlyhave we seen some positive signs that economic growth may be
improving. Istress “slightly,” because no one really expects economic growth for 2013 to be massive.While jobs growth has been relatively weak, there have been some signs that suggesteconomic growth is resuming. However, with much of the data, there can be quite a lot of noise that can distort the underlying strength or weakness of economic growth.One example of a data set that does point to renewed economic growth, though thefundamentals may not be quite as strong, is the recent HSBC Flash China ManufacturingPurchasing Managers’ Index (PMI), compiled by Markit Economics. In January, theChina Manufacturing PMI came in at 51.9—a two-year high, up from 51.5 in December.The January China Manufacturing Output Index was 52.2—a 22-month high, up from51.9 in December. (Source: “HSBC Flash China Manufacturing PMI™: Operatingconditions improve at the quickest pace in two years,” Markit Economics web site,January 24, 2013.)