By Michael Tarsala
One encouraging sign for the U.S. is that consumers’ feelings about the economy are the most optimistic they have been in five years.
The Thomson-Reuters/University of Michigan Consumer Sentiment Index rose to 83.1 in early October, up nearly five points since September, and reaching a high not seen since September 2007. It also was well above economists’ expectations of a 78 reading, according to Reuters.
That rising confidence appears to be translating to actual spending, as well. Retail sales rose 1.1% in September, showing a third-straight month of gains. That is not a super-strong result. What is encouraging, however, is that the sales gains appear to be broad. Even without electronics sales — essentially adjusting for the Apple (NASDAQ:AAPL) iPhone 5 launch as well as gas station sales, retail sales rose 0.9% last month.
The figures cannot be taken as a sign that the economy is fully healthy, or that stocks will continue to move higher.
Then again, rarely, if ever, are you going to get an “all clear” sign from the markets that tells you it’s time to invest.
As hedge fund manager Whitney Tilson laid out recently, there are four factors that could still derail the U.S. economy:
1) A turn for the worse in Europe
2) A downturn for the U.S. housing market
3) The economic slowdown in China becomes a hard landing
4) A sovereign debt crisis in Japan
Yet long-term investors with a 10-year horizon are still better off buying dividend paying blue-chip stocks at reasonable multiples, he says, rather than low-yielding U.S. Treasuries — especially given the high level of U.S. sovereign debt.
The above article comes from Covestor.
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.