A quote from a past presidential campaign provides an answer to bull market deniers who question the validity of the current market’s optimism. That’s not to say that the skeptics don’t have their point: this past quarter has provided enough troubling news to satisfy the most pessimistic doomsday prophets. The litany of ills reads like a biblical description of the end of days: hurricanes, floods, rolling balls of fire ants, violent mobs attacking statues and each other, governments too dysfunctional to confront looming crises and world rulers threatening nuclear Armageddon. Nevertheless, the world economy and its markets have chosen to ignore these troubling signs — some might say bury their heads — and to focus instead on the positive signs appearing in financial statistics. History is full of prophesies of doom that never materialize and economic booms that thrive against backdrops of fear and existential angst: the era of the Cold War, which from 1950 to 1989 held the world in constant fear of nuclear annihilation, was witness to unprecedented economic growth and multiple bull markets. Although the first correct prophecy of the end of the world will have a profound effect on the economy and markets, until that happens or until the financial news turns negative, we can expect a continued disconnect between what is reported on the front page and what is reported in the financial section.
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by Jim McElroy, jmcelroy@argentfinancial.com