They – whoever “they” are – insist that the rising market is predicting a robust economy, not only in the near term, but in the long run as well.
Here I must repeat my favorite quote when it comes to where the market is going. Almost a century ago, the famous economist John Maynard Keynes summed it all up. Keynes, apparently in answer to what he thought the long run looked like, said, “In the long run, we are all dead.” Morbid, but his sardonic comment has stayed in the stock market lexicon all these years.
We’ve had a pretty good stock market for quite some time, but I can’t think of anyone who predicted it a year ago. Sure, some of these million-dollar analysts probably said they were “cautiously optimistic” – one of their favorite phrases, but “cautiously” is just a weasel word. It’s been said that a chimpanzee sitting on the market section of the newspaper would be just as accurate pointing to a stock as one of those overpaid forecasters.
The fact that there are no absolutely reliable commentators doesn’t mean that we should ignore them.
For example, how could I ignore an article in The New York Times with the headline, “A Dire Economic Forecast Based on New Assumptions”? “Dire” is a strong word to use when it comes to the economy. The forecast comes from the Congressional Budget Office, which, in spite of the fact that it has “congressional” in its title, is widely respected by economists, politicians and investors.
In the past, an article about deep pessimism emanating from an authoritative source would probably drag the market down. But not Friday, the day the article appeared. The Dow Jones was up 50 points, shrugging off what would usually be a damaging report.
Speaking about shrugging off, the big story Friday, albeit after the market closed, was the Russian troop buildup on the Ukrainian border. Three thousand Russian – I almost said Soviet – troops moved into the Crimea, whose most important city should be familiar to all of us. The city is Sebastopol, and its namesake 50 miles from Fairfield was, in fact, named after the brief Russian settlement in the 19th century.
But I digress.
Considering that Friday’s market didn’t blink on news of the escalating tension in the Crimea, what do we have to look forward to when the market opens next?
I have no idea whether there will be a delayed reaction to the Russian intimidation, but I can guarantee you one thing: If the market drops sharply, we will hear that investors were spooked by the military tension in the Crimea. Likewise, a rising market will trigger headlines that any of us could write. There is another possibility, of course, that nothing particular will happen, which will leave professional market observers with nothing to say.
One historical note, if I may be permitted, is that the Russian troop buildup in the Crimea is the exact location where British troops were celebrated in the famous poem: “Out of the jaws of death rode the six hundred.”
Stay tuned; we’ll know what “the market” thinks by midmorning Monday.
Bud Stevenson, a retired stockbroker, lives in Fairfield. Reach him at [email protected]