Market Commentary for the week of April 15, 2013

Really up?
Despite recent gains in portfolio valuations, I question whether we are really “profiting” from the upward surge.

To be sure, there is more money in your account, according to your last three monthly statements.  And who’s to argue that doesn’t translate to “real” dollars, “real” well-being.

But don’t confuse stock market gains with progress in economic macro-data, or symmetry in political ideology.

Yes, the economy is healing, and more data is directed upwards than in previous years, but households remain under significant financial pressure and many still feel the pinch of tighter budgets at home and at the workplace.

While there is no “ideal” benchmark, many of us can still remember unemployment below 5%, expansion in wages and opportunity, and the markets hitting “real” new highs based upon corporate earnings growing from higher demand in the product marketplace.  That’s not what we have now, nor is the emotional/psychological connection to the markets as strong.

So are we better-off as the market traverses its upside trajectory?  Maybe.

But compared with that ideal benchmark to which we aspire, the new market momentum is not a cause for elation, but concern.  As stock multiples expand they do so without significant “retail” participation.  Instead, daily volume looks more “institutional” and mechanical.

Really strong?

Statistics might suggest that fewer of us have a vested interest in stocks, or corporate machinery, and that those who do are more fearful, more wary.  Retail investors are insignificant to the titans of corporate boardrooms, but that’s not how it should be.  Instead, accountability to shareholders, large and small, is the basis of equity ownership.  The market’s surge is not raising corporate accountability, just corporate valuations.

Look, its better when stock prices rise than the other way around.  But with interest rates as low as they are, stocks are the only game in town.  One would expect the influx of bond money to raise equity prices.  How many of us, though, feel an intrinsic connection to the stocks we own, or, reciprocally, their interest in us?

Really uncertain.

I believe the data shows that the public still harbors a suspicion about the financial markets, not a euphoria.  In many ways that suspicion carries over into the workplace.  Are we being rewarded yet for the economy’s largesse, or are corporate CEO’s hoarding their good fortune?  There’s a feeling that a long-term, deep seated ambivalence exists between retail America and the investment community.

The merits of this quarter’s market surge can/will be debated, but the bottom line has not changed significantly for the majority of us.

Market gains driven by cheap valuations is not a surge, it’s a speculative bubble with specious and undetermined consequences.  Good faith does not cost a lot of money, but judging by the negative attitude of many, the rewards are still forthcoming, and not here just yet.  The paradigm might indeed be changing, but the benefits of that change are ethereal and tight fisted.