The U.S economy continues to perform reasonably well and is certainly not getting the credit it deserves as we’re still held captive by the European drama. The massive market response yesterday was was a surprise since S&P lowered their ratings on US banks. But the news of coordinated worldwide action of the world’s central banks caught many investors leaning in the wrong direction which caused significant short covering and natural buying.
None of the gloom should be major news to anyone but the US economy remains a relative bright spot: ISM Manufacturing Index for November came in at 52.7, which is a nice bounce from 50.8 last month, economists were expecting a smaller bounce to 52. Indicators are highlighting an improving employment environment with the Rasmussen Employment Index rising to a high last seen in April.
The Fed’s Beige book shows slow to moderate growth.
US corporate earnings for 2012 remain in the $108 range. No decline apparent as of today. Thus the S&P 500 remains at 11x 2012 earnings, cheap by any measure in the past 50 years.
Our investment posture remains unchanged despite the turbulence. Timing is always tricky and we were a bit premature in our buying for a seasonal end of the year rally but should investors take their eye off of Europe and focus on the renewed economic momentum in the US, the rally could finally materialize.
Shortly I’ll be posting a new Green position: Perma-Fix Enviromental
Be careful out there.
Brad
Long PESI