Both Retail Sales and the ASA Staffing Index were reported today. Investors have expressed disappointment in the former and ignored the latter. See the charts below.
Look at the chart for each and tell me what you think!
Jim O’Shaughnessy: Revisting The Ideas Buried In The Graveyard
ValueWalk's Raul Panganiban interviews Jim O’Shaughnessy, Chairman, Co-chief Investment Officer, and Portfolio Manager at O'Shaughnessy Asset Management. In this part, Jim discusses revisting the ideas that got buried in the research graveyard and his favorite books. Q1 2020 hedge fund letters, conferences and more Oh, man. Yeah, for the the research graveyard, do you ever Read More
The TREND LINE is higher than any other year over year reading in the history of this indicator. A higher reading means more people working, collecting a paycheck and having the ability to advance their standard of living, put their college age children through college and generally improve the condition of society.
The Retail Sales report has just hit a record level, yet missed expectations and caused investor disappointment. What does this all mean?
What is means is that many investors are traders and trade on whether a report either beat or missed the expected result. These are often the first individuals to be interviewed on CNBC and the markets respond accordingly. What is ignored by these investors are the revisions to previous reports which is common with statistically derived data derived over time. There is always data submitted late which influences previous monthly reports. Individual monthly reports should never be judged without the context of the multi-month trend. No better example occurred in this month’s report which came in at an increase of 0.1% when 0.4% was expected, but March’s report was revised higher from 1.2% to 1.5%. In the Retail and Food Service Sales chart the trend looks quite positive in spite of the dip due to harsh winter weather earlier in the year.
Rising Retail and Food Service Sales coupled with rising employment only comes during economic expansion. Stock markets have always risen as economies expand over the long term. Investors eventually realize that economic expansion creates more valuable companies.
I remain comfortable that we should experience higher stock markets/lower bond markets for the next several years barring significant geopolitical events.
Oh yes, SP500 just hit an all time high over $1,900 after showing some initial hesitation. The SP500 Intrinsic Value Index is currently priced at $1,962. I expect we have a much higher market ahead if past market psychology repeats.