More good news on the U.S. economy
Continuing upbeat economic news in the United States has had a positive effect on equity markets. Growth stocks and cyclicals have benefited while defensives and staples have been hurt, though we have probably not seen the last of frequent sector rotation. The rally has sent bears running for cover as rising optimism has forced the hand of many professional investors. In such circumstances there is a real, or a perceived, opportunity cost of not participating in the market, which results in the commitment of new money to equities. An advancing market is important not only for generating an inflow of new money but also for keeping money already on the table. The rally in the fourth quarter, and the current upswing, have dashed bearish hopes of a significant correction. Investors have generally refused to take their money off the table. The run of wins in the late nineties was so good that they are willing to wait a little longer and see their
