It is interesting to note that the market started faltering in April when the sentiment about the economy was pretty solid. The following months saw downward revisions to the economic outlook and talk of a “double dip” recession ensued. Now, although slower growth is being reported, the market is holding on and in some cases rising on the “bad news” of the day. Markets always lead reality, sometimes by a couple of months, sometimes longer, but they always lead. That is why the stock market is a component of the Leading Economic Indicators.
Speaking of the LEI, July saw a slight increase. The chart below clearly shows LEI is stable at a level higher than before the recession began. I don’t think we should expect unabated increases in LEI from here, but it doesn’t appear to be rolling over either. This recovery is weaker than normal because consumers are rightfully saving again and thus repairing their balance sheets. We want the consumer to cut back and save again. Our future and our children’s future depend on it. Let the Government pick up the slack temporarily if they must, but we have to learn to live within our means. I for one do not want to be a servant to China (servant to the lender.)
Another reason for a weak recovery is higher than normal unemployment at this stage of a recovery. The below chart fairly well says it all. 
The U.S. was able to add 67,000 private jobs in July, which was better than expected, and June’s figures were upwardly revised. Below is how the jobs picture looks from a high level view.
Chart Courtesy of Capital Economics
Clearly, if you are one of the 15 million that are unemployed, it hurts. Unemployment is impacting everything from retail sales to housing to government outlays and everything in between. I believe a renewed vigor around free enterprise, entrepreneurialism and if needed, retraining, are better courses of action then further imprisoning us with spending programs that bear no fruit.
Investors are very pessimistic. From a contrary perspective, sentiment is very bullish. While acknowledging that market direction over the next couple of months is anybodies guess, I am beginning to sense that too many investors are calling for trouble in Sept. and Oct. so we may well see a nice rally or at least avoid a further pullback. Survey’s say that the mid-term elections will tilt policy makers back towards the middle of the road. I believe that gridlock would be welcomed by Mr. Market. What we do know is that stocks are historically cheap relative to all other investment choices. As well, ten-year stock returns since 1936 are at historical lows. While clearly not a smooth ride, there is symmetry in this chart. For longer term money, this looks like a particularly good time to invest.
I trust you enjoyed your Labor Day weekend and spent time with family or friends. Local celebrity DJ Gerry House has announced his pending retirement from his long running hit talk radio show. At least someone can afford to retire. I bet he has a good planner 
According to news reports, he came to this decision after the wife of a close friend passed suddenly. He had worked long enough and wanted to make sure to fully enjoy his remaining years with his wife Allison. Go Gerry. May your remaining years be plentiful and be inspired.
