Tuesday, May 15, 2012

Economy: Split Personality?

This morning we got news that U.S. retail sales grew 0.1% in April and were 6.4% higher than last year (calculatedriskblog.com). Retail sales are up 23.1% from the bottom of the last recession, and are now 7.7% above the pre-recession peak. But on the stock markets we spot quite the opposite behavior: The stock market indices are hovering on a three month low and the sentiment there is very bad.

It seems that the majority of U.S. citizens show a split personality. In their manifestation as consumers they display confidence in the future and they are expanding their spending with a solid speed. But in their appearance as investors they act contrarily. They don`t trust the future and shun investments in risky assets like stocks which represent the future of companies & the economy.

I bet that this divergence will diminish when the economic upswing continues. A lot of economic barometers show that the U.S. economy is still healing as a result of the expanding global economy and rising company profits.

I reckon that pessimism on the stock markets will abate and investors will come back in the coming months because they are becoming more confident. Their rising retail spending is just the first step.

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