(Un)Seasonal Greetings

It looks like the gloom-crew just might score a couple for their team. For the past five months economic data have been stronger than expected. At the end of September it was widely assumed that the US economy was rolling over, that we were headed towards another recession, and that stocks were headed into another bear market.

But it turned out to be a bear trap. The economy didn’t roll over, and for the past five months almost all the economic data have surprised to the upside. This was aided by the mild winter we’ve been having. When the weather is nice more people go shopping, more construction gets done, and people just feel better.

But weather isn’t climate. In order to make comparisons easier, our economic data have seasonal adjustments built into their computations. A mild winter means that it’s easier to outperform low expectations. But when spring comes there’s normally a buying surge as people get out and make up for lost spending. This year spring may have already come, economically speaking.

So we may soon see a raft of data that undershoot their expected levels, as the normal economic surge that heralds spring doesn’t show up. That doesn’t mean the economy is falling apart, only that things aren’t going as well as predicted.

The economy didn’t boom this winter and it won’t collapse in the spring. We’re in a slow-growth recovery where we gradually claw our way back to normal. Seasonal factors don’t change this.

Douglas R. Tengdin, CFA
Chief Investment Officer
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