It’s The Economy, Stupid

No, this is not about politics, although the original phrase was coined by James Carville in 1992 in connection with President Clinton’s successful 1992 presidential campaign.  According to Wikipedia, the original phrase was, “The economy, stupid”, but is often mistakenly rendered as, “It’s the economy, stupid.”

Obviously, the state of the economy and the outlook are very important to investors.  Recent data suggests that the economy is strong and consumer confidence is high, which augers well for the future.

According to data released by The Conference Board on February 28, its January index of consumer confidence climbed to 131.6 from an upwardly revised December reading of 128.2.  This exceeded the estimates of all economists in a Bloomberg survey calling for a rise to 128.

It appears that the advance was primarily driven by more positive assessments of the current job market as well as greater optimism about future employment prospects.  Other measures of consumer confidence have also remained elevated.  The University of Michigan’s index of sentiment remains near one of the best levels in almost two decades and Bloomberg’s consumer comfort gauge stands at a 19 year high.

Moreover, most economists are not expecting any missteps by the Fed.  The economy does not need an interest rate reduction in order to stimulate demand and inflation is sufficiently moderate as to suggest the economy does not need cooling through an interest rate increase.

If you are an investor, it is the economy.

All comments and or suggestions are welcome.

Walter J. Kirchberger, CFA