There isn’t much that can derail the stock market these days. Jobs report stunk? It’s an outlier. Bond yields rising? It’s a sign of a recovery. Sovereign defaults in Europe? The ECB’ll mop it up. It’s been a good year to be a stock investor, and it’ll probably be a good year for the stock market next year, too.
That’s the general consensus. The Street’s bullish. The crew over at CNBC is in good spirits. Democrats and Republicans are spending like they have a blank check (they do.) Ben Bernanke’s “100% confident” he can control inflation, should it ever appear. Everything’s just peachy again, unless maybe you’re one of the 15 million unemployed Americans.
Or you’re Societe Generale’s Albert Edwards:
I’ve been doing this job long enough to recognise when the markets are entering a new phase of madness that leaves me scratching my head with bemusement. The notion that we are in a sustainable economic recovery is as ludicrous as it was in 2005-2007. But investors are back on the dance floor, waltzing their way towards the next, inevitable implosion – yet another they will no doubt claim in retrospect was totally unpredictable!
No doubt, the music is playing again, and people are dancing. That retail sales report came out this week, and everybody jumped all over it. But how many stopped to ask why? Why are people spending more money now, when unemployment is still “around” 10%, when wages aren’t growing, when companies still aren’t hiring. Why would people forget everything that happened in the past three years and start blowing money again? The answer, of course, is that they aren’t, as John explained yesterday. But subtleties like that aren’t part of the conversation right now.