Uncertainty

It seems that the stock market, the bond market and the world are going through a period of uncertainty. Recently, we have seen a new flight to US government bonds as a safe haven for money from around the world. It is reassuring that the world feels the US is a safe place to have money. The problem seems to be that we who live in the US don’t have the same confidence in our economy. As the second quarter ends, there is uncertainty as to how the economy has performed overall. We have heard this week that consumer spending is up. Corporate spending is up. Productivity is up. On the other hand this Friday we will find out what is happening with unemployment, which has not improved of late, and perhaps get some preliminary numbers on new job creation for June. The uncertainty stems from an attempt to discern if the economy is moving forward with greater profits from companies and more confidence from the consumer, or is stumbling. As of yesterday, the multiple on one year forward earnings for the S&P 500 was 13, where normal would be 18. This discrepancy gives us a clear sign of how uncertain the feeling is about the coming year. We will know a lot more as earnings are reported over the next several weeks. Ed