News Paradox Revisited

By ,   September 2, 2014

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We are seeing another example today of “good news” for the economy equals “bad news” for the market.  U.S. manufacturing hit a 3 1/2 year high in August and construction spending rebounded strongly in July; yet, the the U.S. market has been weak all day today.  

As a follow up to my former post, this is another example of how a larger theme overshadows what would be thought of as an intuitive move in the markets.  Instead of the stronger economic data today pushing markets to rise, markets are selling off as such data is starting to become expected by investors and further supports the idea that the Fed might raise interest rates sooner than the market anticipates (mid-year 2015) on the basis of stronger economic.  

US ISM Manufacturing - Sept 2 2014