Much ado about nothing...

Posted: Mar 28, 2014 1:18:29 PM

This week we received a lot of economic data that does not give a clear direction to what the economy is doing.  Indicators like 4th Qtr GDP, durable goods, home prices, US consumer confidence, personal consumption and jobless claims were  moderate. Other economic indicators were mixed like the purchasing managers index (PMI), Richmond Fed. Today the Michigan Consumer Sentiment came out less than expected.

So far with all the extreme volatility, the S&P 500 is up a mere ½ of one percent this year with many of the more aggressive small cap asset classes down. We tend to weight forward indicators like PMI, Consumer Confidence, Michigan Consumer Sentiment and housing permits as a better economic indicator of what is to come. The S&P’s valuation is at a premium to the historical valuation metrics. Regardless, until we get a clearer picture we expect continued volatility and a continuation of mixed economic data.

So what is one to do? We dismiss the argument that the market should be much higher because there is no other place to put money. In our humble opinion,  that is a technical, not a fundamental reason to invest. Technical reasons are shorter term in nature. What one should do is intertwine their personal risk with market valuations, and see if it still makes sense to add, subtract, or stay the course for one’s personal portfolios.

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