It was the best of times, it was the worst of times, Dickens wrote in A Tale of Two Cities. One might say the same after surveying the outlook for the economy and the implications for investing.
There are numerous straws about that threaten to break the proverbial camel’s back. At the same time, there are a number of counter forces at work that may bushwhack the best- laid expectations of the pessimists for a time. Watching this back and forth, and trying to figure out when and where a tipping point will occur represents one of the more worthwhile areas of scrutiny for the intrepid investor.
On the aisle of optimism is the bullish prediction flowing from the most famous discounting mechanism, otherwise known as the stock market. Equity traders, bless their little hearts, just can’t help bursting with bullishness these days. Friday’s session was particularly exuberant, with the S&P 500 surging upward to its highest since early 2001. Indeed, the 1% climb on May 5 was anything but tentative. The stock market is hardly infallible. But if the steady climb in equity prices that’s prevailed for much of the past two years is misguided, it’s one of the more consistent and lengthy instances of imprudence on record.