The S&P flew up to new highs in early April on the wings of strong economic data while Europe and China were kind enough to stay out of the headlines. The problem with this scenario is that some thought that the economy was more robust than it truly was. Recent weaker economic news, like today’s ISM Services showing, throws cold water on the notion of a hotter economy.
On the flip side, far too many people will now start to think that the weaker data means that we could be headed towards another recession. That is just stinkin’ thinkin’ too.
You see, Muddle Through Growth is what best explains what we have gone through the past 3 years…and it continues through this day. +2.7% growth is considered “trend” growth for US GDP. So Muddle Through is less. More like +2%.
At that pace it sometimes feels like you are about to hit a boom…but it doesn’t happen. And it sometimes feels like you are about to go into a recession…but that doesn’t happen either.
In the short run this scenario will create sideways to downward action. But most importantly, until proven otherwise, we are entering our 4th year of Muddle Through Growth. The last 3 years produced a 100% gain for stocks…I can think of worse outcomes 😉
If you are an active trader, then play the swings in near term. If you are a long term investor, then stay focused on the highest probability outcome, which is that the bull run remains intact.
Best,
Steve Reitmeister (aka Reity…pronounced “Righty”)
Executive VP, Zacks Investment Research
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