Reflecting back on Thanksgiving, I recall fondly how everything was just like it always was: the same turkey and dressing, the classic side dishes that no one can change, and—thankfully—the same faces that we saw last year. From the cranberry sauce to the football games, nothing had changed.
The repeat performances, however, weren’t limited to the holiday table. Once again, the S&P is trading between 1180 and 1190. (On Monday, November 28, the S&P was trading around 1185, after making about a 2.25% gain). That’s just within a few points of where it closed last Thanksgiving, with a settlement of 1189.40 on November 26, 2010. And, it’s within a few points of where we closed in 2004, with a settlement of 1181.76 on November 24 of that year.
How you interpret these numbers depends a lot on your point of view. You might be inclined to grouse that the “same ol’, same ol’” is fine for Aunt Betty’s butternut squash, but not for the performance of a key stock market benchmark. But given all the problems of the world—persistent unemployment, relatively slow growth in GDP, and concerns about debt of every flavor and variety (sovereign, public, and private)—unchanged is not bad. The alternative, as we recall from the debt debacle of 2008 and the worst recession since the Great Depression, is for a massive shift to the downside.
Often I’m asked “how did we get here; what’s going on?” This question is usually preceded by a noteworthy move in the market: the Dow gaining 400 points to trade up to 11,500—or the Dow falling 400 points to trade down to 11,500 (or whatever price point you’d like). We focus so much on these separate moves that we don’t “get” the big picture: which is whole lot of unchanged, despite the volatility in the middle.
The real answer to the question “so what’s going on” is: nothing. The market, that arbiter of perception and reality, has made its pronouncement: nothing is going on. Sure, the stock market gyrates based on there being “deal or no deal” in the Euro zone, or perceptions of the health of the U.S. economy (How are corporate earnings? What’s the outlook for the next quarter? Will the unemployment needle budge?). But if we take a step back from the day-to-day or even the month-to-month, the line is a lot flatter than you might expect.
We’re treading water, which given all the problems out there is not a bad thing. A market that was relatively unchanged from one Thanksgiving to the next is truly something to be thankful for—given all the fear, anxiety, and uncertainty in the world, economic and otherwise. Even the unemployment picture, which has been persistently pessimistic, can’t ruffle the market too much. Currently we have about 131.5 million people working, which is roughly on par with the number of people in the workforce in 2000. Of course, the population has grown, which means that the picture is worse now than a decade ago—but it’s not so bad as to upset the market.
Treading water is not something we can do for the long term. The problems are there and, if not addressed, they will get worse, as you will read in our 2012 Outlook. As we enter an election year, the political debate has diverted our attention from the real problems to strengthen the economy and provide education and employment opportunities for more people. Instead, they fight: red state vs. blue; raise taxes or lower them. We need to look, instead, at systemic issues such as high consumer debt levels, which we’ll address in upcoming blogs.
For now, though, let us take a moment to pause and give thanks. Nothing going on is good news, indeed, and treading water will keep us from sinking.
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