A Delicate Balance in The US Economy Brings Renewed Growth and Prosperity

The US economy grew about 2.6% in the last quarter of 2014. This is reflective of the growth in consumer spending (which represents about 70% of the US economy) of more than 4%, and less than 2.6% for the rest of the economy, including manufacturing and exports. In fact when the US economy is humming along at a healthy clip as it is beginning to do now, improving consumer confidence results. This is a natural consequence of a healing and healthy economy.
Looking closer at consumer confidence (ie, the Thompson Reuters University of Michigan survey), it recently hit an 11 year high of 98.1. This slow but continuing improvement is due to a variety of factors, including low inflation, an improving employment situation, and still low gas prices at the pump. Even more important than this 98.1 figure is the rate of change of this figure. For example, the 6 month change of consumer confidence is one of the largest improvements ever. This recipe is generally a good combination for stock markets. In fact, one of the few improvements similar in magnitude occurred in the early 1980’s, which was the start of one of the biggest bull markets in history. Even though markets are currently near all-time highs, could we be in the middle of another large bull market today?