Here are the key points of disagreement in the never-ending debate between optimists and pessimists, bulls and bears. Based on these observations, and on our evaluation of the leading economic indicators, we believe that the momentum in the economy is still positive.
The recent decline in the volatility of the stock market clearly shows a disconnect between the widespread fear of another financial calamity and the relative calm that’s being displayed by market participants.
While we don’t dismiss the points made by the Bears, we view the Bulls as having a better overall argument. What do you think? Send us your opinion at info@zeninvestor.org.
| Optimist (Bull) | Pessimist (Bear) |
| Euro Zone meltdown averted | Kicked can down the road |
| Stock market at 4 year high | Fed is manipulating stock market |
| Unemployment claims at a 4 year low | Workers are giving up on finding jobs |
| Vehicle sales at a 4 year high | High gas prices will kill vehicle sales |
| Corporate earnings are strong | The pace of earnings growth is slowing |
| Employment growth is positive | Economy too weak to absorb the unemployed |
| Manufacturing activity is getting stronger | Manufacturing share of GDP is declining |
| Consumer spending is up | Consumers are borrowing to support spending |
| GDP is positive and growing | GDP growth too weak to create employment |
| Inflation is tame | Fed is printing money too fast |
| Growth in emerging economies is robust | Emerging economies are slowing down |
| Consumer confidence is improving | Consumers are worried about a new recession |
| Housing data is improving | The housing market is still very weak |
| Lots of cash on the books of companies | Companies are not spending or investing cash |
Which side of the debate do you find yourself agreeing with? Is your glass half full or half empty? My view is that the economy is still weak, but improving as time goes by. If we could just remove the risk of policy mistakes, I believe that the economy would continue to mend itself. Given this outlook, I think stocks are modestly undervalued. But there is no getting around the fact that we can’t remove the risk of policy mistakes, and for that reason I’m still cautiously optimistic about stocks.