Welcome back to the Old Normal.
That’s where markets are free to rise as they have done lately and sometimes fall as they have more recently.
There is also freedom to interpret and digest various bits of economic data.
In the Old Normal, workers are given raises and bonuses when business is good. And business is good today.
Last week’s Dow sell-off of 5.2 percent was rather garden variety. As important as understanding why we sold off is to understand that stocks do this from time to time and have a long-storied history of corrections.
For starters, the Dow Jones industrial average has been up substantially over the last 13 months — since the election, in excess of 40 percent.
That’s tremendous under any scenario, and only a fool or a bad media talking head should be aghast at a correction.
To be clear, many in the media — particularly the outlets that bash President Trump — have a selective memory: The Obama economy posted 1.6 average percentage growth over eight years, but also had numerous large corrections.
These corrections happen despite the Federal Reserve’s zero percent interest rates and its massive consumption of $4 trillion of US treasuries and agency bonds, both of which coincidentally ended just as Obama exited. From 2010 to 2016, there were six stock market corrections in excess of 9.8 percent.
Some pointed to the Feb. 2 employment report indicating strong wage growth of 2.9 percent annualized and screamed inflation.
But I call baloney on the faux inflation suggestion. Americans haven’t had a raise in almost 10 years, so this is just plain catch-up on lost wages.
Worry not, America. This isn’t Armeggedon. We have a fundamentally strong economy, and the markets will be just fine.
Just as we always are after an Old Normal correction.
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