Remember how the sequester was going to destroy the recovery and tank the stock market because of fear and uncertainty?
It hasn’t quite worked out that way. At least it hasn’t so far.
On Friday, the Dow ended a remarkable 10-day run in which it set one all-time high after another. So far, its up nearly 11 percent this year. Likewise, the S&P 500 flirted with its all-time closing high and has seen its value rise 9.4 percent in 2013.
Perhaps the optimism on Wall Street is unwarranted to some degree, but it’s sure nice to see after the past few years of gloom that we’ve endured.
But the brightest spot about this market run is there’s no apparent bubble waiting to burst. Traders are simply seeing what they think are some good buys and they’re making them. Runs like this ended in 2000 with the dot.com crash and in 2008 with the financial meltdown, but there’s no sign of that sort of thing happening this time around.
Remarkably, experts think the market hasn’t yet reached its peak, though specific publicly traded companies likely have. Price-to-earnings ratios still look good, which means stocks will continue to be an attractive alternative to bonds, and the selective investor can still find some investments that are undervalued.
It seems that the nation’s economic engines can continue to fire, even when Congress and the White House fail to avoid potential pitfalls such as the sequester.
The guy on the street, however, always feels the pinch first. In their preliminary reading last week of U.S. consumer sentiment for March, Thomson Reuters and the University of Michigan found that it was at its lowest level since December 2011.
Fewer Americans, the survey found, are expecting to see better growth or a stronger labor market, and more of us are unhappy with the federal government economic policies. In fact, the researchers found that more than one-third — 34 percent — of respondents to the survey made unfavorable statements about the federal government’s economic policies, breaking the record of 31 percent who were disillusioned by Washington back in January.
Lawmakers and the president would be wise to take this time to find a solution to these across-the-board cuts, whose presence will be more pronounced as the year goes on. The last thing the federal government needs to do is be the agent of dampening a good dose of capitalistic enthusiasm.