There’s Love in the Air!
With Valentine’s Day on the horizon, and love in the air, I often feel I have a “love affair” with the stock market. My problem is that it doesn’t always love me!
For those who follow stocks, 2016 began with a lackluster experience for most of 2015 in the stock market. The general market as represented by both the Dow Jones Industrial Average and by the S&P 500 Index, were pretty much flat for the year 2015.
People always ask whether a Presidential election impacts the stock market. Well, with 2016 being an election year, and February being the first month for primaries, it might be easier to answer the question after we get a clearer picture of who might be the major party candidates. Usually, when a newly elected President is viewed as friendly to business, it’s generally viewed favorably toward the stock market. We’re still a few months away from knowing who the two major candidates will be.
Much of the political scene is also a reflection of the state of our economy. If we get a new President who can get things done with Congress, there will be more confidence in our economy, from the perspective of consumers, which can only help our recovery. Even the huge multi-trillion US debt seems less of a concern to voters and candidates thus far in the presidential campaign. Not that the debt is going away, but the fact that the US deficit was reduced in 2015, suggests that our gradual economic recovery is real.
Congress passed a huge $1.8 trillion spending bill before year end, suggesting we might start to get cooperation between a president and both parties of Congress, in the coming year. News at “11.”
A further sign of recovery appeared when theFederal Reserve finally began its long awaited action of raising interest rates by 0.25% back in December. The jury is still out whether the Fed will do the samenext month at their March meeting. Fed Chair Janet Yellen has indicated that as various economic indicators get stronger, the rate increases are likely to continue.
Improving economic indicators should give us some comfort that our recovery is on a steady path.
Those Americans planning European travel in the spring will enjoy a stronger US dollar than in recent years. By year end 2015, the exchange rate was less than $1.10 per Euro.
Domestically, the rate of inflation was almost flat at 0.2% for 2015. This was strongly impacted by continuous lowering of oil prices, which was hovering in the high $30s per barrel at year end. That’s the lowest it’s been for a decade.
Next, there was residential housing prices that increased in 2015, but only at a reasonable rate of approximately 6.0% over the prior year. As 2015 came to a close, mortgage interest rates remained attractive at below 4.0% for many types of residential loans.
Unemployment rate, often viewed as the most important bell weather of economic recovery, fell to 5.0% by the end of 2015. In recent months, new jobs have been growing nationally at or near the desired rate of 200,000 per month.
The only thing that often throws a wrench in our best laid plans is the international picture. Our confidence is often shaken by such things as economic weakness in Europe and China, unrest in the mid-east, terrorism at home and abroad, various natural disasters, and all the other events about which the media keeps informed. Yes, we need to be informed, and we should be concerned, but we should not let these events unnecessarily distract us from responsibly conducting our daily lives.
Our nation is the economic and political leader of the world. When danger and harm affects us directly, of course we need to respond with vigor. But, there are numerous remote events in the world that we cannot control, and that we cannot fix, that are distractions from our economic well-being. If we can keep these distractions in perspective, and pay attention to our important daily lives, our economic recovery, both nationally and individually, will be quicker.
By the way, once in awhile the stock market does “love” me back. It’s in the air!
Harvey Neiman, author
“Customize Wall Street”