The U.S. Economy Upshifts


“Read narrowly, the results show that some survey data suggesting weak post-Thanksgiving Black Friday sales was misleading at best.” — New York Times


No, this isn’t going to be a victory lap about the National Retail Federation and its always-wrong forecasts about holiday retail sales (that annual chest-pounding comes in January). Rather, this is about the recent U.S. economic acceleration and what it might mean for the stock market, the Federal Reserve and bonds.

The combination of falling oil prices, increasing job availability and rising wages bodes well for retail sales. Perhaps more significantly, the economy is now showing unmistakable signs of acceleration. Following several years of subpar job creation, jobs are now being added at a robust pace. As we noted last week, the U.S. is adding an average of 241,000 jobs a month. That’s almost a 25 percent increase from 2013’s monthly average of 194,000.

Some of you will no doubt be compelled to note that any economic recovery is artificial, the result of the Fed’s bond-buying program of quantitative easing and its zero interest-rate policy. To which I say, you are in part right. But I am equally compelled to point out that many of these are the same folks who have been loudly complaining that QE and ZIRP weren’t working. Well, which is it? Is QE impotent or does it generate growth, albeit it artificial? Critics of the Fed can’t have it both ways.

Regardless, investors may want to consider the ramifications of accelerating  economic growth:

No. 1. Economic activity is uncorrelated with the stock market.

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