Current market conditions have been a wild ride for well over a year. From the impacts of tariffs to the huge gyrations and instability in the stock market, to unemployment on the rise, inflation increasing rapidly, and now international unrest – including a war that is not yet resolved. These all make for trying times.
However, the resilience I am seeing is stunning, whether it be the inexplicable strength of the stock market, businesses hunkering down and surviving the storm, or the feeling that all is normal when so many indicators suggest that it is not.
It’s hard to square how the stock market has been charging ahead when, typically, uncertainty and volatility make investors retreat, but somehow at the end of the day enormous optimism remains. I have no idea how this is happening but just wanted to acknowledge that it is.
In stock market reporting, the term ‘baked in’ is often used to describe a situation when something is ‘built-in’ or accounted for in determining its valuation. For example, a particular stock might report low earnings, but the stock price might not be affected because it was common knowledge by that point and ‘baked in’ to the price already.
Perhaps this might best describe what is happening currently. People have had time to adjust their expectations, and realities like inflation creeping upwards, gas prices higher and likely to stay that way, interest rates rising, employment uncertainty are all ‘baked in’ and nobody is shocked by them at this point.
Regardless of the why, it does seem that our economy is responding with great resilience to what otherwise might be considered very challenging times. The shock of being part of these turbulent times might be baked in, and people are going about their business, seemingly unfazed by the chaos.
I’ve often commented on the role consumer confidence plays in the economy, but it might actually be what could lift us out of this downturn.
The impact of the US consumer in our economy cannot be overstated. Consumer spending accounts for nearly 70% of US GDP, so the consistent spending that is seemingly still occurring might very well be driving our economy back towards health, despite the consumer debt it is causing.
From a staffing perspective, I do see some positive signs of life that have been dormant in the last year. Perhaps businesses are coming out of their bunkers, ready to move forward in order to fire back up to meet pent-up demand as businesses begin to percolate once again, but hiring is still very slow.
Is this a ‘false positive’ and possibly premature? Maybe, but just as consumer fear can cause a slowdown, so too can it cause a return to normalcy if consumer optimism rises.
For the first time in over a year, I see room for optimism, not due to the data, but because consumer sentiment is a powerful force that seems to be shining through. Fingers crossed.
