Stocks jumped today on the “better than expected” housing and ISM figures. The housing figures do not shock me. Traffic has been very low and Spring tends to bring out the home buyers. Expectations have been extraordinarily low, however, that does not mean we aren’t going to experience another year or two of price declines followed by a very slow recovery. The ISM was a different story.
The overall reading of 36.3 was better than analyst’s expected, but 36.3 is still a very poor reading. As the above image shows the overall economy is still contracting albeit at a marginally slower rate. I continue to believe investors are overly optimistic about the sequential improvements we’re seeing when compared to Q4. Is this economy simply coming off an extreme low or are we actually seeing real improvement? I believe what we’re seeing is akin to a boxer who gets knocked out in his first match and then celebrates after losing by TKO in his second match. Improvement? No. Better than getting knocked out? Arguably….