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MARKET COMMENT
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Every day, investors are deluged with economic statistics. Data concerning the world's largest economy, the US, is particularly prone to Wise stock market analysis. However, trying to make head or tail of such information is a complete waste of time. The past week or so provides a textbook example of why ordinary investors should not indulge in economic punditry. Last Tuesday (Sept 3rd), the S&P 500 plunged 4.2%, it's largest one-day fall since September 2001. The reason? The Institute for Supply Management (ISM) said its factory index was unchanged at 50.5. Apparently, this signalled weaker than expected manufacturing growth and the stock market panicked. Two days later (Sept 5th), the S&P fell 1.6%. This time, US shares dropped because the ISM said its non-manufacturing index had fallen from 53.1 to 50.9. This seemingly showed a slowing of US growth in sectors such as financial services, construction and retail. Then on Friday (Sept 6th), the S&P gained 1.7%. The US Government said the country's unemployment rate had fallen from 5.9% to 5.7% during August. This bullish economic update contrasted to the earlier ISM data, as the market had been expecting unemployment of 6%. On Monday (Sept 9th), the S&P increased another 1.0%. Gaining 0.6% to $284.2b, the improvement in wholesale inventories suggested to some that the US economic recovery wasn't running out of steam. The net stock market result of all this data? Between August 30th and September 10th, the S&P 500 fell from 916 to 910, a move of just 0.7%. While each individual set of numbers notably drove the stock one way or the other on the day, taken together, they all had next-to-no affect. And so the numbers continue. Today, investors have to contend with the Beige Book. US export and import price indices are revealed tomorrow, while the University of Michigan's consumer sentiment index is published on Friday. Next week sees sixteen different US economic announcements, including semiconductor book-to-bill ratios, consumer comfort indicators and new residential construction figures. No doubt these figures will provide yet more conflicting evidence about the state of the all-important US economy. Suffice to say, rather than muddle through the numbers, stock pickers should concentrate looking for companies that have a proven record of doing well whatever the economic backdrop.