The markets continued their climb higher last month, with the exception of the Russell 2000 which consists of small-cap companies. However, economic data points continue to show weakness. Below is a chart showing the economic data that was released the last week of April, as well as a column indicating whether the data was positive or negative. There are two points that have question marks in the positive and negative column; this is on purpose as the reported data could be looked at either way.
Keep in mind – government statistics should be taken with a grain of salt (some more than others), but quite a few data points come from private companies. None-the-less, this is something we track internally and thought we would share.
In the last few years, the markets were trailing off by this time of year in anticipation of the latest FED economic stimulus plan coming to a close. Currently, we are under a perma-FED printing plan. We know the market looking for direction has nothing to do with a looming stop of the printing press. Granted, we have been hearing some rumblings from some FED insiders that they would like to make the current $85 billion a month in asset purchases variable versus a set amount. As well, there are a few FED insiders that think the FED should wind down the asset purchases. It appears the investing market knows that so long as the FED is buying, rates will stay low, which means investors must seek risk. Forcing investors into riskier assets has certainly provided some lift to the markets, but history shows that anytime investors get squeezed into particular segments of the market, distortions appear. We remain cautious in that we know markets are more fragile than they have been in 90 years. How do we know this? Zero-percent interest rates and central bank asset purchases around the globe with no end in sight are the first two clues.