A Man Walks Up a Hill with a Dog On a Long Leash.

One of the best descriptions of the Stock Market and the Economy was offered to me by a trader at Merrill Lynch. He said the American Economy is like a man walking up a hill. The stock market is like a dog on a long leash. Sometimes the dog runs ahead of the man walking up the hill and sometimes it pulls backward on the leash.  Smart people can spend a lifetime trying to predict whether the dog will run ahead or behind the man. If they guess right, they can make a lot of money. If they guess wrong, well you know.

However, what we can be assured of, is the man will continue to walk up the hill no matter whether the dog runs ahead on the leash or behind. In 1960 the Gross Domestic Product of the United States was a little over 500 billion. In 2023 The Gross Domestic Product tapped out at 25.5 TRILLION that is trillion with a T. That is the hill the American Economy has ascended in the span of 64 years. A little less than one lifetime. There have only been seven years in the last 64 where GDP decreased. There have been 57 years where GDP increased. That is the slow man walking up the hill.

So, while we ponder and read the tea leaves based on quarterly or even monthly results about the economy, the man is still walking up the hill. Last week’s Jobs report which showed reduced hiring sent the dog on the leash scrambling to the rear.  This week retail numbers exceeded expectations with strong guidance. So, the dog ran ahead. The Fed cut rates by half a point in September. Inflation numbers came in at 2.2%. Still slightly above the Fed target of 2%. GDP growth for the year will probably come in around 3%.

So, pet the dog, feed the dog, pay attention to the dog, don’t pay attention to the dog. The fact remains the American Economy will continue it’s slow walk up the hill.