The fact this seem to be surprising people bewilders me. This move has been telegraphed for months. The conclusions I come to are:
1- Pessimism is still rampant and people are choosing to expect to see the “possible bad news” rather than the “obvious good news” in all the data we are seeing
2- The media is simply trying to create drama for every release
3- Bears are simply pumping their book…see point #1. The “surprise” in the numbers for people means their arguments are holding more weight than the opposing view DESPITE being VERY wrong for near two years now.
This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery
The first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More
So now back to geometry and the “if /then” statement. IF the above is true (I obviously believe it to be) THEN this market ($SPY) is in now way even close to being done rising. There is still a stunning amount of negative sentiment to turn positive and a whole lot more people to decide equities are the place to be…..
Feb 2012 employment reports show the Establishment Survey higher by 227,000 and the Household Survey which includes the self-employed higher by 428,000.
Chart 1: Auto Lt Truck Sales vs. Household Survey (Employment) shows the relationship between employment and light vehicle sales. Vehicle sales drive future employment! We should expect the Feb 2012 vehicle sales level of 15.1mil SAAR to drive future employment higher.
Chart 2: Employment Indices Comparison shows the relative levels of each of the three monthly reports, ADP reports on corporate payrolls, Establishment Survey reports on corp. payrolls and government employees (Federal, State and municipalities) and the Household Survey seeks to capture total employment including corp. payrolls, government and self-employed. Each data series has accelerated higher from the 3yr trend in place from Jan 2009-Dec 2011.
These reports together indicate a sharp acceleration in US economic activity. Historically market psychology turns positive and equity prices are driven much higher.
We have witnessed a steadily improving economy and now are to benefit from our patience with weathering the volatility and pessimism of the past 3yrs.
Remember, the market has risen more than100% from a SP500 low of ~670 in March 2009 to 1365 close yesterday. This has been in the face of horrendous global news and extraordinarily poor investor market psychology. The lesson to learn is that it is the economy which trumps sentiment!!