Amid More Good Economic News, And Despite Terrorism In Munich, Investors Are Confident In US Stocks
Following a decline in May, the Index of Leading Economic Indicators rose three-tenths of 1% in June, confirming the economic expansion is still intact. The data suggests that the expansion in economic activity will continue at a moderate pace for the remainder of 2016. The LEI is a forward-looking index. In the past, it dropped significantly before recessions, so it is widely watched.
"Improvements in initial claims for unemployment insurance, building permits, and financial indicators were the primary drivers," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "While the LEI continues to point to moderating economic growth in the U.S. through the end of 2016, the expansion still appears resilient enough to weather volatility in financial markets and a moderating outlook in labor markets."
For the second week in a row, the Standard & Poor's 500 stock index closed at a new record high.
The S&P 500, a gauge of the value of America's largest publicly-owned companies, rose about five-tenths of 1% for the week. The index closed Friday at 2175.03.
This bull market is one of the longest in modern financial history over the past 80 years.
Throughout the last six and one-half years, rising stock prices have been propelled by growth in the U.S. economy and rising corporate earnings.
Despite much higher volatility in world affairs as well as share prices, the stock market has continued to march higher.
Neither the rise in terrorism, nor the fears that a Chinese economic slowdown impairing growth across the developing world have been able to end the long bull run.
Before an economy falls into recession, the leading economic indicators drop. Just look at how, before the last two recessions, the LEI collapsed.
This is not the kind of economic reading you see before a recession.
In fact, the economy is not showing any of the usual signs that a slowdown is on the horizon.
On Friday afternoon, July 22, with more than two hours of trading remaining on Wall Street, another terrorist attack occurred, this time in Munich, Germany.
U.S. stock prices were not affected. That's not a sign that the civilized world is coming to accept terrorism as a routine event. Rather it shows that we are confident we will prevail.
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