A multitude of reports have come out this morning that show big gains for a number of retailers. CNBC's Jim Cramer says that this means the major averages might be low http://www.cnbc.com/id/36230309. On the other hand, there were 460K new jobless claims that exceed expectations.
It seems everyday there are conflicting new reports. If people are still losing their jobs, why are they still consuming so much? My opinion is that the stock market itself is creating a wealth effect that makes people feel better than they otherwise would if they relied more exclusively on their income. Unlike Cramer, I don't believe today's retail sales show that a great recovery is underway or that stocks are going to rise rapidly - depending on your timeframe. If Cramer is suggesting that the stock market may go up in the next month or two, that's certainly possible. If you have the flexibility to move in and out of the stock market it is possible it may go up.
Personally, I believe Bond markets are still the place to be. These include corporate and Federal T-Bonds. I still do not see a sustainable job recovery. I suspect the stock market is currently overvalued and will decline within the next few months. Once this happens, you will see a selloff and people will stop consuming. The pyschology of the wealth effect will go in the other direction and numbers will go down again.
Folks may feel richer at the moment. But they are not.
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