The Week Ahead: Are You Worried About The Economy?

Focus: STRATEGIES

Unusually mixed economic reports are stopping the US stock market from surging higher like many of the other global markets, but will this "wall of worry" be overcome? MoneyShow's Tom Aspray analyzes the data to determine whether you should be worried about the strength of the economy and which sectors you should watching for new investments.

The conflicting economic data last Friday made for further choppy trading, and the major averages closed mixed. The Dow Industrials and S&P 500 were higher, while the Nasdaq-100 closed the week lower.

It has been my view over the past few months that the stock market's strength was a sign that the economy was really stronger than the majority thought. Over the past few months, the economic data has been better than expected, with the housing sector especially strong.

From a global perspective, the industrial production has continued to be a concern, as it has turned negative for most of the world with the exception of the US and China. Therefore, last Monday's sharp drop in the ISM Manufacturing Index caught many off guard, as the consensus view was for a reading of 51.7 while the actual number was 49.5.

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A value over 50 indicates an expanding manufacturing sector, so the November report did raise some concerns, as the chart shows a pattern of lower highs (line a) since early in 2011.

This report was followed last Wednesday by the ISM Non-Manufacturing Index, which came in at 54.7, above the consensus of 53.6.