Industrial Production was reported this morning higher by 0.7%-the chart and link to the release are below. What is interesting here is that past 2 mos’ data have been revised higher so that the trend shows a rather sharp spike which can be tracked back to July 2013.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
The economy has always taken precedence over market psychology.
1. When the economic data shows a contracting trend in all components(at least 6mos) then eventually market psychology turns more negative.
2. When the economic data shows an expansionary trend in all components(at least 6mos) then eventually market psychology turns more positive.
Market psychology and markets rise and fall in unison. If one has a grasp on the driving force for the former, one can develop reasonable expectations of the latter. I did not say predict which carries the implication that one can predict price/date. Many claim to do be able to do this accurately, but I think these claims do not understand that business returns cannot be accurately translated into market prices when prices are based for the most part on what investors think about the immediate future.
I think the most one can do is gauge the future direction using a long term view of past history/events/economics. One cannot say this price will be attained by such n’ such date.Industrial Production accelerating as we see today is contrary to the negative views we have seen the past several months, the market calls for 20%-50% corrections, recessions, financial collapse and etc.
The current Industrial Production trend which I think is easy to see in the chart, suggests that an investor turn towards a more positive market psychology should be anticipated. Higher stock prices should be anticipated.
Please note that CSX Corporation (NYSE:CSX) just reported strong earnings and CEO Michael Jon Ward said ‘…business is strong.’ Link: CSX 4th Quarter Report