Dollars and Sense: Economy, markets continue dispensing good news

Healthy jumps. The U.S. Supreme Court ruling upholding a key provision of the Affordable Care Act and lots of merger and acquisition (M&A) news in the healthcare sector caused it to surge last week. Cigna, Anthem, Humana, and Aetna are among the healthcare companies in the midst of merger and acquisition talks.

Correction? What correction? The Nasdaq set a new record last week, and the S&P 500 is just shy of its all-time high, set in May. That correction everyone keeps talking about, or the crash that some people are talking about, just keeps NOT coming. Will it get here eventually? Yes, but consider this: The Dow is essentially flat for the year. The S&P is up, but only by about 2 percent. The equities markets usually rise at a rate of about 8 percent a year. So if a year goes by and the markets remain flat, is that the same as an 8 percent correction? It’s possible the markets are slowly correcting themselves over a period of time rather than showing one-day drops. We’ll get a better idea if this slow-moving correction is actually happening when the Fed raises rates—whenever that might be. If the markets stay calm, I think we might look back and say the markets were correcting themselves as we went along.

Whither rate hikes. And while we’re on the subject of rate hikes: Federal Reserve Governor Jerome Powell said last week the economy could be ready for interest rate increases twice this year. That statement lent credence to a Reuters poll of economists that said they expected a rate hike in September, and another by the end of the year.

Economic news solid. Turning from the markets, we got other economic news last week, and it was mostly good. U.S. home resales in May surged to their highest in five and a half years as first-time buyers piled into the market, the latest indication that housing and overall economic activity gathered steam in the second quarter. I mentioned above the M&A activity in the healthcare industry, but other deal news emerged this week. Martha Stewart Living Omnimedia will be bought by Sequential Brands for about $353 million. The Commerce Department said consumer spending increased 0.9 percent last month, the biggest gain since August 2009. That big bump came after another smaller rise in April. Personal income also increased 0.5 percent last month after a similar gain in April. Weekly jobless claims rose 3,000 to a seasonally adjusted 271,000 for the week ended June 20. But labor market conditions continued to tighten, which could lead to great employment, higher wages, or both.

A cliffhanger in Greece. Greek Prime Minister Alexis Tsipras certainly thinks he can reach a deal with his country's creditors. He said as much in several public statements last week. I think he’s probably right. I’m not a betting man, but if I were, I would bet on some sort of a deal, with odds close to 50-50. The eurozone countries are not as desperate for a deal as they were a month ago, and nowhere near as desperate as six months ago. Most analysts think Greece has overplayed its hand. Greek leaders have been betting the European countries would not kick them out of the eurozone. But Greece has behaved so badly, and the eurozone has recovered so much economically, that Germany and other European countries are willing to tell Greece to shape up or ship out. So either we’ll get a deal, and that will be good for the eurozone and for Greece, or we won’t and that will be devastating for Greece but not so much for the eurozone or the rest of the world. Greece will just become a very troubled nation, and one more country to point to when you want to explain to someone why socialism doesn’t work.

The week ahead. The month turns over, and the second quarter of the year comes to an end this week, so we’ll get a lot of metrics about how we did beginning on Wednesday. Since we are in a new month, we get the big employment report, out on Friday. The current unemployment rate is 5.5 percent. A lot of people will be looking at the employment participation rate, which is the percentage of workers eligible for work and actually working. That rate has been at its lowest level since the 1970s, but it has shown signs of bottoming out. If it is unchanged or up a bit this month, that will be a good sign. If it continues downward, you can expect that number to be a part of the conversation in the weeks ahead.

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