Short the Pessimism

Pessimism has become somewhat of a national pastime of late. I am not buying into it.

In spite of all the recession talk, the U.S. economy continues chugging along. Just this morning, we received news that new orders for durable goods ended Q4 on a very strong note. We had a 5.2 percent gain. That comes out to 22.6 percent annualized growth over the past three months. Meanwhile, unfilled orders, the leading indicator for sector activity, also showed strength with a 2.5 percent gain for December (20.5 percent over 3 months).

These are not recessionary numbers.

And don’t forget: firms have been able to keep up their capex activities because credit is still flowing; business loans are up 21 percent from a year ago, and bank credit (which includes business, consumer, and real estate loans) is up 11 percent. Remember that firms have filled coffers from some very profitable years.

Even in Q4, earnings outside financials are healthy. The latest tally shows that roughly one-third of non-financial companies in the S&P 500 have reported and market-weighted and share-weighted earnings per share are up about 23 percent from a year ago.

I’m not buying into the pessimism. It’s a non-starter. Sure, we may experience some bumps and bruises along the road, from time to time. But in the end, the economic dynamism that lies at the core of this country always seems to come out on top.

The story of America is a story of prosperity, peace, and leadership. That’s not going to change any time soon.