Stock Market: Reality Check April 2014

(Drivebycuriosity) - Today the US stock market closed with a solid gain (S&P 500 + 0,8%). The panic from last week is almost forgotten. I think this is partly a response to the massive selling of the recent days which made especially technology stocks significantly cheaper. The S&P 500 trades at about 17 times earnings. While that’s near the highest level in four years, it’s close to the average since 1937, writes Bloomberg (bloomberg).

Today´s stock market gains may also be the result of a reality check. This morning we learned that the US economy is sounder than the alarmists want us to believe. We got news that US retail sales increased 1.1% from February to March (seasonally adjusted), and sales were up 3.8% from March 2013 - the best sales data since 2012 (bloomberg). This shows that the US consumers don´t care about the fearmongers in the media and ignore the hysterical behavior of hedge funds and other speculators. The consumers show still optimism and spend money.

Since the retail sales are an important engine of the US economy the consistent consumer spending will continue to create economic growth which will translate into further stock market gains, I believe. I also think investors could learn from the consumers and show more reliance. The panic we saw in the last week doesn´t make any sense.