In Today’s Markets Investors Need To Stop Swinging For The Fences And Focus On Fundamentals

Any Conversation these days needs to begin with the phenomenal run the KC Royals made to winning the World Series and becoming the 2015 Champions.They kept at it.Overcame sizable obstacles, long odds and yet persevered.Similar to the US economy and markets.The odds of a total financial collapse were high.The resolve, flexibility and commoditizationof the US work force were questioned. Yet here we are six years later.We too just refused to tap out. 

The US economy continues to run at below historical trend levels of 2 ¼%-2 ½%.Perhaps this is just the new normal until the next technological breakthrough. Perhaps we are now all benefiting from our last breakthrough and rounds of massive investments in software and technology.Consider the average age of an automobile on the road these days is 11 ½ years old up from the historical norm of 8 1/2.  The refresh cycle for computers is now closer to four years up from two. New drilling techniques (fracking and horizontal drilling) require far fewer workers and equipment to extract ever larger quantities of oil and gas.  There are many more examples such as these that are allowing companies and consumers to do more with less. This year the US economy is adding in excess of two hundred thousand jobs per month. Pretty solid but not enough to spark any real wage inflation.Again, we must pose the question are we simply seeing the benefits from prior investment cycles?  First let’s see where we are currently.  

Jobs.  Non-Farm payrolls caught the street by surprise Friday when reported by exploding higher tallying +271,000 where most analysts had anticipated an add of +139,000. There were revisions to the prior two months that tacked on an additional twelve thousand.There was other good news backed in here as well as average hourly earnings ticked up +.4% which gives us a +2 ½% gains over the past year. So, looking at the new three month average we are creating 187,000 jobs per month, good just not great but just maybe enough room to allow the Yellen Fed to hike interest rates that first ¼%.