In the investment world, much has been made lately of the divergence between hard data about the U.S. economy and so-called “soft data”, which deals more with how people feel about the economy.
The soft data figures paint a rosy picture—consumers and business owners are confident and ready to spend money and hire workers. The hard data shows an economy trudging along. Muted retail sales and limited business capital spending directly contradict the soft data figures. The hard data suggests the recovery is over and the US economy is slowing into recession territory.
This chart is concerning for all investors. If the hard data is more accurate, the stock bull market may be near the end. If the soft data is more accurate, there is more room for this bull market to run.
While no one is able to predict which measure of the economy is correct at this point in time, when taken in context with some of the other economic indicators that tend to worsen before recession, it seems that the economy is actually decently healthy:
As only history will prove the winner of hard or soft data, we suggest that you review your portfolio and be ready for either scenario. Making sure that your total asset allocation is appropriate for your long range goals, as well as diversifying prudently among asset classes that can thrive in a growing or slowing economy, is a great May project!!