The Curious Case of Positive Market News

By Alan Steel

So much ado about Trump and altitude sickness over Dow Jones 20,000 point markers, that less attention (as ever) has been pointed towards all the good news and trends.

Recency bias and the new President’s chaotic media presence is not a basis upon which to manage your investments. As Ben Carlson over at A Wealth of Common Sense points out, “The word emotion literally means ‘to move away.'” And that’s exactly what too many investors do when emotions run this high.

We should be looking instead to the likes of Scott Grannis of The Calafia Beach Pundit blog who (as ever) has produced some terrific visuals about the improving state of manufacturing conditions in both the Eurozone and in the U.S. over the past several months.

Sadly, for many investors out there these perspectives might arrive as curiously positive when considered against the dour daily drivel of mainstream media agencies. Theirs is a world where bad news pays better than good, and that commercial imperative has long-since assumed the advantage over the editorial foundation that first brought it to the public table.

Scott writes: “Meaningful improvement in the Eurozone economy has been a long time coming and thus is probably not fully appreciated by the market. A coordinated recovery in manufacturing conditions in Europe and the U.S. seems like too much to hope for, but that’s what these reports are suggesting.”

And for some additional perspective on the (potential) future state of a US economy that helps drive the global one, the relatively anonymous scribbler(s) at Chart of the Day offer up the following:

Chart 1 Feb

“Today’s chart (1 February, 2017) presents the ECRI Leading Index (a composite of seven indicators chosen for their ability to signal both the beginning and the end of economic recessions). Since 1970, a significant downturn in the index of leading economic indicators has preceded the beginning of a recession by about ten months; a significant upturn in the index has preceded the end of a recession by an average of two months. The exception to this was following the financial crisis as the economy worked to realign some historic imbalances. Over the past year, the ECRI Leading Index has surged and is currently at all-time record highs – a positive sign for the economy over the near-term.”

Sadly, for many investors out there these perspectives might arrive as curiously positive when considered against the dour daily drivel of mainstream media agencies. Theirs is a world where bad news pays better than good, and that commercial imperative has long-since assumed the advantage over the editorial foundation that first brought it to the public table.

And what of the global research elite; the Ned Davis’s and Pring Turner’s of this world?

Well, Ned Davis tells us that the risk of global recession near-term has faded dramatically, and that conclusion is based on monitoring numerous economic and sentiment indicators from well prior to Trump’s victory and subsequent market bump. 

Print Turner agrees, saying the market and economic positives far outweigh the negatives at present.

Now that’s not to say that we shouldn’t expect the usual bumps and dips along the way.

But long-term investors should, in light of the current view, see these as opportunities to be taken advantage of, as the more timid rationale of the investor herd (as ever) abandons its positions for the presumed safety of bond funds, cash and ETFs.

And if you haven’t already, stop considering the headlines as any type of market insight. Instead, get some good advice from someone with a long and checkable track record of investment success.

Because after all (as ever), it’s your money.

Alan Steel, Chairman, Alan Steel Asset Management

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