The Economy May Stink, but the Stock Market Doesn't Care

CNBC ^ | 04/27/2013 | Jeff Cox

[SeekAndFind]

Another lackluster quarter of economic growth is likely to have the same impact on the market as its predecessors—which is to say, not much.

Despite a prolonged period of weak improvement in gross domestic product, stocks have continued on a progressive, albeit bumpy, ride higher.

The 136 percent stock market surge over the past four years has come despite the weakest recovery since the Great Depression, and more recently signs that those expecting a period of stronger growth will be disappointed.

No matter, though, as investor—riding a wave of Federal Reserve liquidity and sentiment that the U.S. remains a safer store of money than its troubled global competitors—keep buying despite the slow economy.

"There's just this disconnect from reality," said Kathy Boyle, president of Chapin Hill Advisors. "The high-frequency funds are just controlling this market. Anyone who's rational thinks this market is overvalued and things are slowing down."

Yet a quarter that brought such lackluster growth—2.5 percent against expectations of 3 percent—saw the stock market surge 9 percent.

Friday's letdown had little effect either way, with major averages treading water around midday.

The GDP report came amid a backdrop of a so-so earnings season in which influential Dow Jones Industrial Average components Caterpillar and AT&T reported substantial slowness in their business.

"The major industrials are telling you things are not good," Boyle said. "China is in slowdown, Europe is in crisis. But la la la, we're still going to trade the market."

One of the main drivers behind the trading mentality has been the Fed and its $85 billion a month in asset purchases.

In addition to the basic liquidity, it's also fueled a belief that even if conditions don't improve dramatically, they'll be enough money around to keep equity prices floating.

[expat_panama]

...doesn’t sound like you got your cash by being smart...

You're closer to the truth than you may realize

Being smart is way over rated and I find brains gets trounced every time by hard work and attention to detail.  When some say they think I'm 'slow', I tell 'em it's just that I'm geared down for a heavier load. 

Back on topic, lot's of people blame the problems of the world on the rich & powerful & mho is it just sour grapes.  In their heart of hearts they know they could have had a lot more wealth and power had they just put in a bit more effort.  We pretty much all live with the results of our choices but not enough of us are happy with what we earn and even fewer are willing to admit they got what they deserved.