Monday, December 02, 2013

Put on a happy face....

It's been some time since I've tried my hand at the old glass is half full trick so here goes....

If you work under the assumption that every number provided to us is valid then there are some reasons to be optimistic about 2014 and beyond.  However, I'm really talking solely about economic activity and not about the stock market which is completely removed from economic activity at this point.

1) Construction spending seems to be strengthening while the residential market takes a bit of a breather.  There is little doubt that construction has picked up meaningfully from the 2009 lows, but it is still well below its 2005 peak. The devil here lies in the details construction spending is really being driven by apartment construction (and some would argue we're in a bubble of apartments).  Apartment construction is fine, but it's not the economic driver that single family home construction is.  I'd also point out there will be a wave of substantial public (state and local) spending that will hit in 2014.  States tend to lag the economy and while they were hesitant to spend in 2011 and 2012, they've opened the checkbooks in 2013-14.  There will be projects large and small everywhere for the next couple of years.

I'd also note that school construction (at least in NY) is likely to step up meaningfully in 2014.

2) A number of consumer trends are pointing up - vehicle sales, restaurant trips, etc - all seem to indicate that the consumer is feeling better (but Black Friday brought some rain on that parade).

Again, this is conversation about the slow moving wheels of the world's largest economy.  The daily dose of confidence delivered by green on our stock screens is filtering it's way through to the system.  The validity of the increase in stock prices is a topic for another day.


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