The last quarter of 2018 saw a constant drumbeat of negative
“news” that likely contributed to a psychologically induced drop in the stock
market. Headlines like, “Worst December
for stocks since 1931 gets worse as rate hikes spook investors” were
commonplace. Social media regurgitated the narratives. One
would have thought the sky was falling despite an abundance of contrary
economic performance measures that the economy is strong.
Something is wrong when armchair analysis by novice
investors can detect the difference between economic reality and a false
perception, but “journalists” cannot or will not. The American public would do well to guard
against watching biased and unreliable television “news” and informing
itself (or rather not informing itself) through social media. The resources are available to make better
economic decisions. The only requirements
are time and focus. The rewards can be
significant.
What is the evidence the economy is strong?
In the 1960s, economist Arthur Okun created the misery index
economic indicator. The misery index is
largely the addition of the inflation rate and the unemployment rate. The lower the number the better the
economy. The Carter Administration holds
the title for the worst Misery Index at more than 20 (Inflation over 14% and
Unemployment over 7%). Dwight Eisenhower
had the best at only 3.28. The current
misery index under the Trump Administration is 5.9 – the best since Eisenhower
in 1952.
Recent release of end of year 2018 and January, 2019
economic data confirm a strong U.S. economy.
Lagging Economic Indicators (Table 1) illustrate how well
the U.S. economy is performing. LAGGING
indicators are facts about what has happened in the recent past. They can help in making some prediction about
the immediate future, but straight-line projections of historical trends are dangerous
and to be avoided. In general, look at
this table to assess where the economy is right now.
