May 9, 2016

Last week I wrote about the bizarre disparity between the market and economic realities. Unfortunately, there continue to be several examples and they keep popping up anew.

For instance, in mid-April the Dow Jones Industrial Average jumped more than 350 points in a two-day span. That’s not necessarily surprising, market jumps and dips occur all the time.

Analysts pointed to J.P. Morgan’s positive numbers ($1.35 earnings per share versus an expected $1.26) as the cause. And make no mistake, those are solid numbers. 

But are they spectacular enough to move the entire market 350+ points? I’m not so sure. What’s more interesting than J.P. Morgan’s earnings is what the “experts” aren’t saying.

For instance, overall retail sales dropped by 0.3 percent in March, led by a 2.1 percent decrease in auto spending and a 0.8 percent decline in restaurant spending. McDonald’s, Texas Roadhouse and Darden Restaurants were all down, despite the market rally.

Similarly, the Producer Price Index dropped by 0.1 percent in March, which is surprising because Wall Street expected it to rise by 0.3 percent! It also fell by 0.2 percent in February, so our 2016 thus far is proving to be a tough slog.

Taken together, the combo of negative retail sales and deflationary wholesale prices should drive the market down, not way up. Right?

Somehow I feel that if the market did go down as one would expect from these conditions, the Fed would step in to save the day (again). This bull market is proving to be shockingly immortal.