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Is The New Record High In Stocks Irrational?

The Standard & Poor's 500 stock index, the key benchmark of current financial and economic conditions, closed at an all-time high for the second week in a row.

Is it irrational exuberance?

These four charts show the latest data on key fundamental economic factors driving financial market prices.

Third quarter economic growth reported by the U.S. Bureau of Economic Analysis came in at 1.93%. Three of the four factors in economic growth — business investment, net exports, and state and local government spending — did not contribute to growth but consumer strength offset them and was the source of the 1.93% quarterly growth rate for the U.S. in the third quarter of 2019.

Meanwhile, the manufacturing sector — which accounts for just 11% of U.S. growth — remained in recession but rebounded slightly last month, according to the latest data from the Institute of Supply Management. It may have bottomed.

The Federal Reserve's key lever in promoting growth, the yield curve, uninverted, indicating that fears of a recession may be overblown, and the financial obligations ratio — a key measure of consumers' free cash flow after paying monthly fixed expenses — remained near its strongest level in decades after ticking lower last quarter.

No one can predict the next move in the stock market. However, the latest economic data indicates that the record stock prices are pretty darn rational.


This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.


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Index
Keeping Perspective In An Unreal Environment
Economic Fundamentals Recovering As Stocks Surged For the Week
Stocks Swing Wildly As Economic Recovery Begins
Dog Days Of Summer In The Economy 
V-Shaped But Full Recovery Is Long Off 
Covid-19 Causes A Good Surprise
The Epidemic Sets The Economy Back About Two Years
Is This A New Bull Market? 
The Pandemic And Stocks
Despite Disastrous Jobs Report, Stocks Surged 1.6% Friday
Amid The Crisis In The Economy, Two Good Anomalies
Business Owners Must Act Now On COVID-19 Relief
Financial Economics With The Epidemic's End In Sight
The Beginning Of The End?
An 11.4% One-Week Gain In Stocks
What Investors Should Expect And A Business Owner Alert 

This article was written by a professional financial journalist for Responsive Financial Group, Inc and is not intended as legal or investment advice.

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