Wall Street going like gangbusters, but your livelihood could still be on the line
The stock market has been surging lately. But what does this really mean for the average New Jersey investor?
A bull market has traditionally been perceived as reflecting a positive, dynamic and growing economy. But that perception may be changing in some respects.
“The stock market is a tremendous thermometer of today’s temperature, but it’s a terrible thing to set your long-term course by what today’s temperature is,” said Ken Kamen, president of Hamilton-based Mercadien Asset Management
“One of the perverse truths of American capitalism is that as companies do better, in some ways they do it by cutting costs, by bringing more money to the bottom line, which makes every share more valuable. But if the cost they’re cutting is your job or some technology that outsourced your widget, it does not really spell well for you on an individual basis.”
He stressed having the stock market continue to climb higher is certainly positive in a general sense, but it may not necessarily impact your personal situation in a positive manner.
“Perception becomes reality very, very quickly on Wall Street, and a positive stock market leads to a better consumer sentiment. If people think things are doing better, then they tend to shop and do things in a more robust fashion, which then becomes a self-fulfilling prophecy.”
He said this can become a sort of "virtuous cycle."
“If I feel better, I might spend more money. if I spend more money, the economy is doing better. And if the economy is doing better, I should be able to get a raise so I could spend more money,” he said.
Kamen stressed when it comes to the stock market, “people have to constantly be thinking about how they fit into this ever-evolving economy.”
He pointed out Macy’s has announced they’re laying off 10,000 workers, but Amazon has just kicked off a major hiring effort in New Jersey.
“It’s really a question of keeping your eye on the long term, and it’s the same with the stock market — you have to see how things are moving in relation to your personal situation and the economy, and not get caught up in what may be happening today,” he said.
How does the global economy play into all of this?
Kamen said as the American economy continues to strengthen, there’s an expectation we could soon see higher interest rates, which will make the dollar stronger, and which is going to make American goods and services less competitive on the global market.
“Companies that have a lot of business overseas might see some negative effects, but then again, smaller companies in the United States that have less exposure to international markets might actually do better from a stronger dollar,” he said
While we seem to be in an optimistic cycle right now, it’s important to remember that “a lot of this euphoria about what the president-elect is going to be able to do in a short run, I think is a little too optimistic," he said.
"Making new laws and changing tax codes is a messy business and takes a long time, and I think some of the euphoria in the market right now might get dampened down. I expect it would be.”
Contact reporter David Matthau at David.Matthau@townsquaremedia.com.