The steady drip of slightly positive or merely "less bad" economic data continues. This week's data showed that second-quarter GDP grew slightly faster than first thought and CPI inflation was less. Housing numbers were better and prices actually rose. First-time jobless claims declined again and purchasing managers are more upbeat. The picture is becoming clearer. The recovery and eventual expansion will be slow, but it's coming.
In our last blog we said that sooner or later stocks would break through the upper end of the trading range that has contained them since the spring. They did so last Friday and the buying has continued. The month of September was the best since 1939. Short covering explains some of it, but the rest of the buying is by people who anticipate earnings growth. That's a good bet.
There are other reasons too. The largest: alternative investments are unattractive. Professionals know that and they're putting money to work but many individuals are still not on board. That explains why people continue to liquidate stock funds in favor of bonds, never mind the yields and risks of the latter. They'll regret it. Bottom line: stocks are going higher.
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