Market Commentary for the week of September 16, 2013

Good week.

Depending upon where you reside, or on which side of the issues you fall, it was a good week last week.  We averted a military strike on Syria by the U.S., at least temporarily; we had reasonable adjustments to economic growth statistics; and most made some money in their portfolios.  While cyclical dynamics are relatively benign, the broader secular outlook continues to build a solid foundation for recovery.

The odds that an exogenous news event might derail long term prospects are diminishing, further still.

However, as noted above, where you reside also might influence your outlook upon, and prospects for, optimism and recovery.  Amongst the under-developed economies, for example, the gap between robust recovery and outright despair seems to be widening.  The main goal of local economic authorities seems to be to consolidate costs, protect the affluent, and increase isolationist propaganda that maintains the status quo.

Hence, while there is no specific threat of economic collapse in most regions of the globe, the socio-economic gap between the haves and the have-nots is exacerbating, while more are going hungry or homeless, and a centralized accumulation of capital leaves many without good paying jobs or hope.

The rate of acceleration of this disparity is also quickening.

Survival and selection.

My goal is not to write political or social commentary.  However, the impact of these societal and moral regressions is having, or will have, a mighty influence upon capital formation in the world’s financial markets.  Consider the cost of military incursion into nations far away, and you might anticipate a reverberation upon homes, schools, healthcare, infrastructure, and science back home.  The great enemy of a growing economy is taking one’s eye off the moral tone of the environment in which those decisions are made.

The bull market is gaining traction, and we need to appreciate that it has to be a bull market for many in order for most to feel prepared to accept their responsibly of keeping it vibrant.  Even small actions can have a magnifying impact upon one’s neighborhood, a kind of “pay-it-forward” attitude about one’s prosperity and place in the world.

The structural backdrop for the market’s resurgence is gaining momentum.  Productivity and employment are rising, inflation is low, and many sectors which had been dormant (Industrials, Financials, Cyclicals) are starting to see bases being built around a new vitality and capital expenditures worldwide.  As noted, the likelihood that one event might derail existing velocity is quite remote.  Change takes time, and the time spent building out of our most recent (man-made) global recession has proven to be impressive.

Meanwhile, competition for goods and services globally, is redefining the transfer of, and access to, wealth.  Profit margins are widening and the location of those profit centers is diversifying into regions heretofore not known as powerhouse industrial clients.

The only concern we might have about far-reaching successes is a widening of the slats in the floor which could allow the unseen and underrepresented to fall through.