Once again, the U.S. Federal Reserve summarized the overall growth in the economy as "mild to moderate" in its Beige Book report. Meanwhile, other economic analyses keep pointing to troubling signs, both in the U.S. and around the world.
One gets suspicious when the same positive term is used so much. It could be true, of course, but it could also mean they're polishing the economic apple, emphasizing what good news they may have and burying the ungood deep in the report.
On the same day that the Fed summary was released, Wall Street posted a major drop in stock indexes, prompting a New York Times reporter to wonder whether investors know something the rest of us don't know. And in Europe, there's a growing revolt against German insistence on a policy of austerity to resolve economic problems. The International Monetary Fund has called for government stimulus via an "infrastructure push" to kickstart the economic engine.
For the moment, there are too many conflicting signals to make a clear call on a trend. All in all, however, the future does not look great. As for those who continue to believe that Wall Street is a barometer of the overall economy, it's important to remember that too many investors trade on fear. That is, an unreasoning fear that drives their buy or sell decisions.
Alan Greenspan a few years ago warned of "irrational exuberance" when the stock market bulls were running. It's also good to bear in mind that irrationality works both ways, and the exuberance may be just illusionary bull.
No comments:
Post a Comment