No joke: The economy is surging
Despite a modest stock-market pullback and mediocre job and income gains, global manufacturing is growing at a pace not seen since early 2011.
While everyone is preoccupied with Syria and the related machinations in Congress, the economy is quietly posting its best performance in two-and-a-half years. Not just here at home, but globally as manufacturing activity revs up across Europe, in Japan and in China.
Investors aren't paying attention because they're worried about Syria and the potential for Russian/Iranian/Hezbollah retaliation to any airstrike, as well as the specter of a spike in oil prices. They're worried about the looming budget negotiations in Washington as we once more approach the debt ceiling. And they're worried that the Federal Reserve will pull back its cheap money stimulus.
If we can clear those hurdles, the real economy is poised for a big rebound. Here's why.
Just look at the U.S. ISM Manufacturing index that was released on Tuesday. The reading for August came in at 55.7, following on July's 55.4 result (any reading over 50 indicates month-over-month growth in manufacturing activity). Compare that to the sub-50 reading we saw back in May.
(Post continues below video.)
According to the folks at Capital Economics, the current level of activity suggests overall GDP growth will increase to a 3% annual rate in the current quarter. Again, this is a level of strength we haven't seen since early 2011.
It's a similar story globally. Europe is exiting its recent recession, with the Eurozone Manufacturing PMI increasing to 51.4 for the best result since May 2011. German activity hit a 25-month high. The U.K. Manufacturing PMI came in at 57.2 with the manufacturing output subindex posting its best performance since July 1994.
In China, the manufacturing sector is finding its footing again after Beijing's efforts to crack down on excessive lending dampened growth over the summer. China's HSBC Manufacturing PMI returned to growth last month with a 50.1 reading -- recovering from an 11-month low of 47.7 in July. Japan's JMMA Manufacturing PMI posted its sixth successive month of month-over-month growth on an acceleration in both production and new orders.
Earlier this year, the stock market soared while the economy struggled. Now, the relationship has reversed. While that's great news for middle class families waiting for a better job market or a long delayed raise, it means that investors face an even more treacherous market this autumn as a long list of catalysts are poised to buffet stock prices.
That's why you're seeing stocks in key economically-sensitive areas like steelmakers and key industrial commodities like copper struggle to get traction. Just look at the Market Vectors Steelmakers (SLX) and the iPath Copper (JJC), and compare to the chart of manufacturing activity above. Clearly, the market believes the manufacturing rebound will prove short lived.
If we can get past Syria, the budget battle and the Fed taper with limited dramatics, the economy could finally achieve the "escape velocity" we've been waiting years for and return to a more normal growth rate, ending the long post-recession slog.
But until then, investors need to remain cautious with larger-than-normal cash allocations.
Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
MSN Money on Twitter and Facebook
Really? What a bunch of crap! The truth would sound more credible to say "No Joke: The economy is beating! Like a heart attack! and needs the continual resuscitation of federal monopoly money to keep it pumping!
Smoke and Mirrors,
How nice of the Wall Street bluebloods, the CEO's and the privileged, ensconced in their tailored Zegna suits, Gucci loafers and Mercedes Benz roadsters to tell everyone else that the economy is just peachy.... and getting better by the moment. There seems to be no end in sight of the corporate shills and professional BS artists who write about the economy and the 'mouthpieces' for our esteemed Federal government that tout it's 'continued healthy growth'.
Perhaps if I was not eating P&J sandwiches, Ramen and pork n' beans most every day, I too would probably believe all of this 'crapola' that is infecting the media like the bubonic plague. Let's get real, the economy sucks for the vast majority of the 312 million average Americans, and it is getting progressively harder for virtually everyone just to keep treading water...let alone get ahead. These pundits and blowhards continue to lie by slathering layer upon layer of lipstick on the pig...but the pig is quite comatose and very near death. Peace to all ~
Seeing as we just finished our FOURTH (4th) RECOVERY SUMMER, things sure look bleak for a surging economy. And we still have OBAMACARE coming out, that will FIX EVERYTHING!
GOING DOWN IN FLAMES.
LOCK AND LOAD. The future sure looks bright. LMFAO
Copyright © 2014 Microsoft. All rights reserved.
Bill Stiritz has experienced an estimated $145 million in paper losses on his investment in the company.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.