HAUKE: Market the moodiest of economic indicators

Hello, operator? Yes, we seem to have a disconnect. Everyone still has their foul-weather gear on, but the stock market
is calling for blue skies. Can you try the line again, please?

Economists and other experts have differing views
on how accurate the stock market is in terms of being a leading indicator. Some people are adamant that the economy lags the
market by four to six months, and others don’t use the stock market at all when thinking about the economy.

I believe the stock market is the only indicator you need to use, but doing so requires a willingness to understand that
the market is a moody you-know-what. Its downright bipolar nature simply means it is going to swing around a lot more than
the general economy, but it gets the changes and direction down pat. It just has a problem with magnitude.

There
were few if any businesses in the world preparing for a slowing economy in fall 2007. By the middle of 2008, however, it was
becoming more obvious to more people that a change was in the wind. The only leading indicator I needed was the stock market.

Seeing the market lose more than half its value might put one on the path of thinking the entire global economy was
about to fall into total chaos. Things got bad, but nowhere near the point of a return to the dark ages.

That’s
how the stock market works. It moves much higher or lower than what you will actually see in the outside world. And the last
six months are another example of the stock market’s throwing off a signal that is accurate regarding the change and
direction, but wrong about the strength.

Most business owners around the country would probably agree that conditions
today are not as bad as they were this time last year. But they still believe conditions are bad.

Unemployment
is still going up. Foreclosures are still rampant. Commercial real estate is still heading south, and overall building is
still at a standstill.

How can the stock market be up so much with all these bad things going on? That’s
the market for you. In March, it simply said things were going to get a little better, and indeed they have.

Most
businesspeople will begin to actually feel and agree with the better times sometime next year. But the stock market, at some
point in the intermediate future, will go way beyond a mild recovery, which is what we will most likely experience.

There is a possibility that, at some point in the next six months, the market will have you believing paradise is just around
the corner. It is at that point that it will really begin to demonstrate its erratic behavior.

When the market
flies past the point of how much better the economy will actually get, we will once again have two beautiful and time-tested
opportunities. The first is that, toward the end of a strong rally or bull run, a few select industries get carried to ridiculous
highs. No. 2 is the easy money that can be made on the way back down.

Down the road, I will share my thoughts on
which industries might be picked. We will save the strategy session for profiting from a down market until we get closer to
that point. For now, don’t struggle with the market’s mood. It has been up for a while, and it should keep going
up for a while.

Moody? Yes. But the market sure is fun!•

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Hauke is the
CEO of Samex Capital Advisors, a locally based money manager. His column appears every other week. Views expressed here are
the writer’s. Hauke can be reached at 203-3365 or at keenan@samexcapital.com.