It’s hard to believe we’re already two weeks into the New Year, and signs of optimism are emerging. So far, the S&P 500 has risen by 2.9 percent, the Nasdaq has gained 2.5 percent, and gold is up by 3.1 percent. Even silver, surprisingly, has shown a remarkable increase of about 4.5 percent.
Good times are on the horizon—it almost feels tangible. There’s an excitement in the air reminiscent of the pre-housing market crash days. Isn’t it time for things to turn around?
After the challenges of recent years, who wouldn’t appreciate rising asset prices?
These increases can make a person feel more knowledgeable, affluent, and even more attractive. Suddenly, a man’s thinning hairline seems to reverse while the numbers in his 401k statement rise instead of fall. Opening his monthly statements now brings him joy, as he revels in the illusion of ever-growing wealth, perhaps believing his investment instincts rival those of Warren Buffett—if not surpassing them.
Yet, the intoxicating allure of rising asset values can lead him to make impulsive spending decisions, often on credit…
Highlighting an Improving Economy
The latest Federal Reserve report, released on Monday, indicates that consumer debt rose by a seasonally adjusted $20.4 billion in November—the largest increase since November 2001. Clearly, consumers are ready to embrace spending on credit like never before.
It’s evident that the world is primed for a new bull market, and if the trends from October continue, it may very well materialize. Since October 3, 2011, the S&P 500 has seen a remarkable increase of 14.5 percent.
This could indicate a more sustainable bullish trend, as both financial markets and significant economic indicators point toward an overall improvement in the economy…
The Conference Board’s index of U.S. leading economic indicators, last updated just before Christmas, rose by 0.5 percent in November, in addition to a 0.9 percent increase in October. Signs of growth in manufacturing, the housing market, and consumer spending suggest a promising trajectory for economic expansion in the coming three to six months.
Should this trend persist, the unemployment rate is likely to decrease, leading to increased hiring and further economic growth. Essentially, the self-perpetuating cycle that previously hampered the economy is beginning to reverse itself.
Embracing a New Dawn
Of course, the financial markets are not without their risks. The European debt crisis could spark panic at any moment, and substantive measures to address U.S. government debt remain lacking—posing a continuous threat to the global monetary system.
Bond expert, Bill Gross, states that “financial markets and global economies are at significant risk.” He adds, “we seem to be transitioning into a world with increasingly unpredictable outcomes.”
This observation holds merit. Numerous unforeseen events could disrupt markets and plunge the economy into chaos. Nevertheless, despite a streak of pessimism, the observable reality is that the economy is undeniably gaining strength.
At Economic Prism, our outlook has been unyieldingly grim for what feels like eternity. Yet, unexpectedly, we find hope stirring within us as we witness signs of recovery…
After enduring a long, bleak night, we now perceive a faint light beckoning. We hope it’s not an oncoming locomotive, but rather the first glimmer of dawn hinting at a brighter future for the U.S. economy.
Stay tuned for more updates…
Sincerely,
MN Gordon
for Economic Prism
Return from Seeing the First Glimpse of Dawn to Economic Prism