US economy – what on earth IS going on?

I’m delighted as usual to share Steve Peasley’s weekly analysis of the economic news. There are some really contradictory signals  coming out of the US economic data right now. Are we seeing green shoots of recovery? Are we overdue for a stock market correction? Why is the US dollar strengthening against other currencies? Is the creation of new jobs sustainable?  This is Steve’s take on it.

Economic numbers were quite good this week and this supported the market as it went higher. The US economy is gathering a little strength with unemployment claims dropping again. With jobs being produced, this created some underlying support for the stock market.

Remember though that bond and other asset yields remain at all time lows globally and so there are piles of money looking for places to go and if stocks can show even a short term return, that’s where this money will go. This is my view about what is artificially creating stock price growth, rather than any great optimism about long term returns or outlooks. So I completely agree with Steve that we are overdue now for a stock market correction.

Confusingly, the US Dollar is getting stronger while the stock market is going up. This is exceptionally unusual. Usually the stock market goes up when the US Dollar gets weaker. One main reason is that other economies worldwide are not keeping up with or not as good as the US. The US economy may not be that great, but it is way better than the majority.

My thanks as always to  Steve for his excellent  insight and analysis.