The Dread of Weak Economic Data.

When I was younger I had a number of clients who were alive during the “Great Depression” of the 1930s. The experience shaped their lives. They were acutely aware of the effect that financial and economic panics had on their lives. Some lost their homes, even their families.  They were generally a cautious lot, ever concerned about a recurrence of those traumatic events.

Many of today’s investors wonder if the things that led to the “Great Recession” of 2008-2009 will recur. When weak economic data is released, some experience the beginning of panic.

Brian Westbury of First Trust puts it this way:

“Dread” is the perfect word for what many investors have felt in recent years. Some have experienced it daily since the bottom in March 2009. Some experience it whenever the stock market falls.

But dread really sweeps the markets when there is weak data, a change in fiscal or monetary policy or during market volatility. This means it has cast a pall over markets once or twice a year during the past six years.

Remember the feeling on September 2, 2011, when it was reported that payroll employment in August was a big fat zero? That was dread. Remember when real GDP in the first quarter of 2014 was negative? Dread! The thought of tapering? Dread! Or at least a tantrum.

Well, here we go again, except this time the bar for feeling dread has been lowered drastically. Payroll employment increased by 126,000 in March and some analysts reduced real GDP estimates to less than 1% for Q1. You guessed it: dread. Double dread!

There are a couple of things that have to be kept in mind. We have to take a look at a lot more than a single statistic, or even two; statistics which are by their nature volatile and subject to revision for months and even years. In addition, the recovery from the recession has been slow and labored; we have referred to it as the “Plow Horse economy.” When you’re growing at about 2.5% annually, bad weather, oil price changes, a West Coast dock strike or even normal volatility can bring you to low or even negative growth for a brief period. And then, of course, everyone’s worried about the effect that a rate increase by the Fed will have.

But none of this is going to choke off what we see is an almost irrepressible economy that is showing remarkable recuperative powers despite government policies that are not helpful.

While we expect to see a continuation of volatility, we also have faith in the entrepreneurial spirit of America. The funds that we have chosen are managed by experienced investors who have weathered many storms. With the return of warm weather, which brightens our lives and allows us to spend more time outdoors, we continue to invest with cautious optimism.

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