So who is right: the slowdown camp, or the acceleration camp? When you look at the charts, as I do each weekend, it's almost impossible to tell, but it is a hidden source of strength for this market.
What do I mean by who is right?
Let's start with an initial premise. If you believe the U.S. economy is weakening -- a case can be made on erratic, subdued retail sales and GDP numbers -- and you believe the world is slowing, then you think that interest rates aren't going higher.
Therefore you are going to gravitate toward the utilities, the real estate investment trusts and the consumer packaged goods stocks, because they have outsized yields. Now, it's important to understand that these yields really offer you, in most cases, very little actual support. To pick a very good one, Simon Property Group (SPG) -- the nation's largest shopping mall operator, thought to be a target of Growth Seeker portfolio holding Amazon.com (AMZN) -- is a stock with almost a 3% yield.
Sounds attractive, right, with 10-year Treasuries at 1.5%? You get the regular earnings growth and dividend boost of Simon Properties, vs. that static income from bonds. The boosts are empirical: Simon paid out $3.50 in dividends five years ago; now it has a $6.35 payout.
But let's look at it another way. You have a $227 stock. You drop six bucks and change, and you are even. Anything below that and you are in the red. Six bucks is nothing for a stock with that dollar amount. Three months ago that stock was at $193. That's a $24 loss if you were to revisit that level, which isn't far-fetched, because I could argue the U.S. economy is weaker than it was in May. Go ask Dividend Stock Advisor portfolio name Ford Motor (F) , if you disagree.
I do not regard that yield as any legitimate protection whatsoever.
Same thing goes for the utilities. I like Dominion (D) . It is fast growing and it is also a very low cost provider of electricity. It yields 3.5% and it, like Simon, is at its all-time high. You will get $0.70 this quarter. What good will that do for a $78 stock? It is a rounding error, especially when you consider that the stock traded at $69 three months ago.
Or, take Kimberly-Clark (KMB) . This company's stock is definitively not on the new high list, having reported a quarter that was panned as subpar. But it yields almost 3% here, and I simply don't know if that will keep it from falling further. My instinct is yes, but when the stock was nine points higher than where it is now -- it went out at $129 -- and sailing at its 52-week high, it sure wasn't protected by the $0.92 they sent you this quarter.
Compare that to the other stocks that are flying: the steels, the techs and the stocks connected with housing -- except the housing stocks themselves.
Now, I get that the steels, namely Nucor (NUE) , AK Steel (AKS) and US Steel (X) are big winners now that we shut China and Korea. But the techs? You simply could not have the boom we are seeing in all sorts of techs, but particularly the semiconductors and the semi equipment companies, but also many of the tech services companies, if there weren't some sort of demand acceleration. Sure, there are takeovers occurring. But that's a sign that the managements are bullish about the future.
And how else do you read the houseware boom? Think about the new highs or near highs that were hit by Fortune Brands Home and Security (FBHS) , Masco (MAS) , Stanley Black & Decker (SWK) , Home Depot (HD) , Mohawk (MHK) , Newell Brands (NWL) and Lowe's (LOW) . Those aren't idle. The fact that many industrials like Illinois Tool Works (ITW) , Cummins (CMI) , Caterpillar (CAT) , Ingersoll-Rand (IR) and United Technologies (UTX) are doing so well doesn't augur poorly for the nation or the world's economies, either.
So who's right? I would argue that the two camps aren't holding back. They are both putting their money where their mouths are. Is it possible that both are right? Seemingly not: it's hard to believe that we could have such a severe statement that rates are going down with all of those economically sensitive groups going higher.
But that said, maybe it's like Washington: there's gridlock right now, and it does have a sense of permanence.