I am going to play devil's advocate:

1.- While the market continues to hold near all time highs, i.e. just a few percentage points off its recent highs, one can argue that a whole lot of stocks are in either correction or bear market territory.  A stealth bear market?

2.- Even though the economy was producing many low paying jobs, at the other end of the spectrum, high paying jobs are being filled and going unfilled, e.g. computer scientists, IT profesionals, doctors, registerd nurses, security experts, etc ...  There are millions of jobs going unfilled , it is a structural problem in our society, but not because the economy itself is not producing good quality jobs. 

voanews.com/co...4.html

3.-I could also argue that we have what looks like the beginning of a modest ramp up in wages.  As the job market continues to tighten, it will lead to nicer wage increases.  In a recent post I included the link to an interview where it was stated that the job churn across the economy for this past year was 60M jobs. This confirms a healthy job market, people no longer feel tied to a job.

4.- Energy is cheap:  Gasoline prices at 7 year lows, heating oil and natural gas also at multi-year lows, these savings are going into people's savings or possibly may start being spent.  True, some families are in a savings mood, but some will eventually start spending these savings.  When I fill up my tank, it is costing me some $20 less than it did in May 2014, I fill up three times per month.

 

I am not going to play devil's advocate, I'm going to obfuscate, lol:

You're absolutely right, I *think* that a lot of what you've said means that there is a divide between 'winners' and 'losers' on lots of fronts:

Some stocks are in 'depression' mode (oil, and related energy), some in 'vague' mode (housing) and some 'en fuego' - forward looking tech companies.

Some people who were obscenely rich are now Porn XXXXXX rated rich. A younger, more moble, educated by academia or apprenticeship to be in the right place for jobs expands that  1% to.......even if it were 50%, that's 51% - a majority. And younger workers are used to a workplace without benefits or security. Mobility is the standard.

If we measure 'quality of life', and tie it to 'condition of the economy', one could make an argument that the majority of people, companies, the market, and the numbers that measure them would probably say the majority of all are doing just fine, and the future looks reasonably bright. As you intimate if wages rise, housing booms, good cycles grow, on and on.

But there's a large 'underclass' (I've said this too many times before - I apologize in advance) - consisting of some of the young who didn't get trained in useable skills, to the late middle age (50-55 and upward) who got 'downsized' but either their skills aren't as valuable, or employers can hire 2 people 25 years their junior rather than pay their previous wages), to retirement - a huge class of baby boomers who haven't sufficiently saved for retirement, are going to live longer (80 is the new 60) and whose needs will increase as they age, with not enough adequate places for them to live with the assistance they'll need. And the young don't want to pay huge taxes on wages to pay for these 'strange' people - why should they shoulder those burdens?

The question becomes, I think, do we have a viable society with an under-class and an over-class. Can we effectively say to the untrained, the aged (both working and retired), to the obsolete auto workers replaced by robots, "Hey - Piss off - Not my problem you've got yourself in a mess."

I think I agree that there may be schizms that run through society and its institutions - companies, people, and commodites (incl. housing)  who are in the catbird's seat, and those who aren't. Is the glass half full or half empty? 

Half full for some. Half empty for others. Broken for the truly screwed.

Societies of haves and have nots have more been the rule than the exception throughout history and in world-territory. So it's possible these have-nots can be ignored, and when they die-off, society will be the better for it. (Europe, having *created* an underclass of emigrated Arab and African 'worker bees', who are isolated and alienated from the culture they live in.....)

OTOH, the have-nots have sometimes become worryingly agitated - and those who said "Let them eat cake" (Or, "Let them shoot dope", "Let them play Candy Crush"), were finding their heads in a basket beneath a guillotine. I'm beginning to think that there may be enough methods, economic, law enforcement, and otherwise, to keep revolution out of the equation. But I do think with all the things you noted or considered, things are good or bad depending on what side of the societal 'schism' you are on.

I find it ironic that even the liberals are starting to push for a 'controlled' society - Obama said let's make it illegal for terrorists to buy guns. Is the Postal Worker who got laid off and cursed his boss a candidate to label a 'terror threat' and have his/her movements/phone calls/personal info/ on and on monitored (you *can't* 'live off the grid' - Google knows exactly where you are, and for even a low price (economy of scale) will sell the govt. all your information - part of the NSA 'secret budget'.) Yes, I sound like a paranoid fruitcake - and it's hard to believe 'Skynet' could happen. But I found Obama not defining who exactly is a 'terrorist', but that their civil rights ought to be compromised, a bit chilling. (And I'm not a gun nut either - if it were up to me, our gun laws would be similar to most civilized first-world democracies.) My point is, with minute monitoring of just about everyone, you probably can't have a lot of terrorist cells. But you also probably can't have a coordinated, legal opposition to the powers that be, either. They know not only where you live, but what you're doing right now. (Ack..something.....someone.....just..cut..off..my..oxygen supply. Must...cough.. chip.....implant.....out ....of......my lungs. (gasp gasp).

 

I did a bit more due diligence on how companies in the S&P have fared so far this year.  Keep in mind these prices are YTD, not from their highs, so it could be worse than this.

109 companies (more than 20% of the index) are down more than 20%, some of these have declined more than 50%

69 companies (more than 10% of the index) have declined between 10% and 19.99%

93 companies (nearly 20% of the index) have declined between 0.01 and 9.99%

So in all, about 50% of the companies in the index are in negative territory and from the looks of it in trading today, we may have more companies in the red.  

We may indeed have already had a market correction, with some sectors in bear market territory.  Not to say the bloodshed should either stop or continue, the market will do what it will do.  However, I lean towards not much further down as I do not see this economy going into a recession.  Europe is in the land of negative rates, so it is tough to argue it goes down much further, in fact I think it manages to just have a shallow downturn.

 

As to your post and comments, tt is indeed a world of haves and have nots, but then again it always has been, but something this country had not experienced to this degree in the past 70 years. Which was the point of my post.  The shifts in the economy exacerbated by the fast pace of technological change will continue unabated.

 

Those who are out of the economy may never go back to their previous standard of living; they are likely to linger at the bottom.  Our kids must be ready and educated to face the rapid pace of change.

lt cap,

Thanks for sharing your research on company valuations. I find it hard to get a clear picture of where we are and where we're going with this economy, given that, I'd think, some of the biggest losers in those S and P companies are commodity related (and particualrly oil companies), not an intrinsic measure of our economic health but a Saudi manipulation; and some of the biggest winners are beneficiaries of the Fed manipulation of the market, and its hard to tell their intrinsic worth without Fed support. For every positive stat that indicates economic health (e.g., jobs, wages) there's an alternate example for a dimmer economic picture (demand for the basic 'stuff' that builds economies is terrible (CAT is down from about 110 to 66.) So, my great insight in that is - I don't know, lol. We'll perhaps 'bump along' fine as long as we're a better comparison to other world economies.

I think you are right about paying attention to making sure our kids get the education and/or training they need to compete for the jobs out there. There are some cogent arguments made that, in terms of lifetime earning power, the steep investment in a college education is not more economically favorable than training ('appreticeship' the Barron's article you cited spoke of) in a specific skill that is all but certain to be in demand.

 

Jamok,

We have many divergences in the our economy, and then one could layer divergences in how the Feds around the world are acting. 

Corporations had been growing revenues for the past several years, but have had issues growing them this year, a lot of cross winds.  Two things corporations have been highly reluctant to do is increase CapEx significantly, increase hiring in a significant fashion, this has led to persistently low productivity.  This too is affecting sluggish revenue growth, and has kept wages under pressure.

Consumers have also been reluctant to spend too much, this is of course a good sign for the long term but keeps pressure on corporate revenue.

With commodities under pressure, one can safely say that it is the result of a slowing global economy, yet, it should portends positive things for consumers in general, but specially so for consumers with decent household incomes.

So where does the economy go here and abroad????

My take is that this is a "Profit Recession" more than a standard recession.  With interest rates starting what should prove to be a slow but long rate hike increase period, that too is likely to keep pressure on markets (a psychological impact more than a real one), but I am unsure/don’t think this evolves into the standard recession, which if it did and as we all know would bring with it lots of job losses, higher government deficits, and additional pressure on commodities and dare I say, lower inflation? 

 Counter balancing these negative winds, is the fact that around the globe, we have Feds supporting markets (China, Japan and Europe), and one can argue that the US Fed is only midly affecting the cost of money as it lifts rates from zero.  In short, the biggest economies of the globe are for all intents and purposes in easy mode.

 

This leads me to "assume/believe “that any slowdown should be shallow and mild.  Then again, I am typically on the wrong side of where economic activity goes.

lt cap,

Well explained, thanks - and it seems a reasonable interp of what going on and what may well go on in the macro. 

I'm not especially alarmed, but somewhat puzzled by how some of the companies, American telecoms in particular, have continued for years to avoid laying out capex of major proportions for increased bandwidth. Yes, ATT got slapped with a $100mln fine by the FCC (peanuts) for defrauding customers by selling them 'unlimited data', but not telling them that after a couple of gigs, that data was throttled back automatically to 2G speeds. With everyone demanding data for everything from watching streaming movies (4k is coming) to webcasting selfies of themselves eating breakfast (fascinating), I'm puzzled that such buildouts haven't been forced upon them without such big delays. 

 

Agree re telecoms, they are extremely conservative when it comes to CapEx, but very lose with rate increases, they can get away with it because they are oligopolies, so where else can you go to if typically you only have two choices, and they do not compete in price?

In my neighborhood for example, I can get U-Verse or Comcast, but the pricing is basically the same for the same type of package.  But hey!  There is no collusion, none whatsoever.

I read a lot re debt yesterday as the market fretted about all that could go wrong. It appears as if the amount of debt outstanding could spell problems for some institutions and investors have  eached for high yields, not to the same degree as back in 2008, but it is likely to dent them plenty.  Some are calling it a debt bubble. Read about a fund that put redemptions on hold, not good news.  These are the sort of things that spooks markets and by extension consumers.

Clearly I had not realized nor quantified the debt problem and its negative effects it is likely to have if the level of defaults ding financials.  Monday could be uglier than yesterday.  

As usual, it is the stuff one does not completely grasp that comes around to hit the markets.