Wednesday, February 5, 2014

Economy/Stock Market: Ignore The Weather

(Drivebycuriosity) - The weather in New York City and the whole U.S. northeast coast is really nasty these days. Temperatures are swinging below and above freezing point. This causes a naughty mix of snow, rain, sleet and ice. This morning streets are almost impassable.

The stock market shows a similar pattern. The S&P 500 is volatile reflecting a risk-on risk-off behavior. Coincidence?

Maybe not. Bad weather also takes its toll in some economic numbers. It seems that the disappointing recent manufacturing & job market reports (ISM manufacturing & ADP report) are a tribute to the winterly conditions. Low temperatures and traffic problems are hampering production in some industries.

We don`t need a crystal ball to know that the weather soon will get better. I believe the stock market will do the same. In the moment the sentiment is spoiled by disappointing economic numbers from the U.S., problems in a row of emerging markets and the ongoing taper of the monetary stimulus programs. But the global economy is still in a sound growth mode. This morning we learned that Europe´s manufacturing is getting better (ISM manufacturing). We also heard that the U.S. service sector (ISM services), that covers around 2/3 of the economy, is still solidly growing.

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