Stock Market: The Realm Of Negativity

(Drivebycuriosity) - The US economy is growing more than 3% annually, the unemployment rate is falling to historical lows and company earnings are climbing 25%. But the US stock market is in the doldrums. This week the Dow Jones lost 2.2% the S&P 500 dropped1.6% and the Nasdaq slid 2.2%. Positive news and strong fundamentals are dismissed and ignored, instead the market focuses on cautious guidance and pessimistic predictions about next year´s economy (marketwatch). It seems that the stock market entered the realm of negativity again.

The sentiment on the stock market may be a reflection of the pessimistic zeitgeist. Negative thinking is cult and regarded as smart. And the future is supposed to be bleak. The majority of movies which are regarded as science fiction are dystopian:  Hunger Games, The Road, Divergent, Oblivion, Equilibrium, The Giver and many more. It´s the same with science fiction books - especially those catering the young adult. And many predictions on Bloomberg and other finance sites are dystopian too. "America´s Millennials will wake up to a grim to a grim future", claims Bloomberg (here my comment)!

I suppose that the negativity cult is a response to the recessions of 2001/02 and 2008. Even though the economy has recovered and is doing well again the shocks caused by 2 recessions in a short period are still influencing the group thinking. Once bitten, twice shy.

But I assume that the US economy will stay on growth course and company earnings will continue their swift rise. The dystopian thinkers ignore that the US economy is getting more efficient & more productive over time - thanks to learning processes and the technological progress. Corporations are learning organisms because they are managed by humans who are continuously improving themselves and their companies. They had restructured during the crisis of 2008 and reduced costs significantly in order to survive. Now they are more fit & more efficient than before.

Company earnings are also boosted by automation.  Since the early 18th century (the first industrial revolution) the technological process has been enabling companies to produce more goods & services with the same amount of employees. More and better machines are doing the work of people which translates into lower costs, higher profit margins and climbing earnings.

It seems that this process is accelerating again and we are at the begin of new industrial revolution. We are experiencing a rapid advance of information technology, meaning combinations of computers, smartphones, Internet and other digital systems. Software - which is increasingly Internet connected and uses more and more the cloud (access to huge external data centers) - organizes the whole business: Creating new products, inducing machines to run more efficient, finding cheap suppliers, manage customer relations and so on. Car producers and many other manufacturers are increasingly using robots and similar machines to reduce their costs. Companies are also beginning to use 3D-printers to become more cost efficient and flexible.

I suppose that the economy - and so the stock market - will do much better than the majority expects and will refute the current negativity again.