Friends, I’ve been away quite a while and miss hearing from everyone. I’ve been launching a new company over the past month or so, and life has been CRAZY busy. I’ve been working later than normal, and have been having trouble sticking to my 5:30 AM blogging routine.
Anyways, I think it is important to open up a discussion with all you smart folks about HOW AND WHY the US stock market has been on suck a tear over the past couple of months. If you made some good decisions 3 or 4 months ago, your investments are probably up 50% or more!
IF you believe that the US stock market is a “leading indicator” for the US economy, this run in the market would lead you to the conclusion that we are heading out of “The Great Recession” post haste…THE TROUBLE I have with this theory is that our home values are still falling, so the US consumer is feeling a negative “wealth effect”…also stunting our growth is the fundamental shift from consumption to savings. I believe that most sensible people are going to save more and keep real tabs on their spending habits.
I also fear that mutual fund managers have been chasing returns, and this is artificially pushing up stock prices ahead of the actual earnings growth of these companies. (I hope I’m wrong though and that good companies were just SOOOO oversold that we are getting back to fair value)
All this to be said, I’m loving the run up in stock market values, but I’m worried that the market is getting ahead of its self and banking on a sharp uptick in the overall US economies growth and consumer spending.
Do you guys really think that is going to be the case, or are we looking at a major pullback soon? Will $3.00 gas pull us back down? As always, any and all feedback and ideas are appreciated. There is SO much knowledge left in the comments of this blog!