Fisher Investments Editorial Staff
US Economy

The Day the Twitter Died

By, 08/10/2009
Story Highlights:
  • US stocks capped the 15th positive week out of 21 since March's bottom. World stocks have been positive 16 of 21 weeks.
  • Don't look for headline news to explain stock movement. Stocks move on future expectations, not yesterday's news.

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On Thursday, for approximately two hours, the world came precipitously close to irrevocable mayhem if not utter annihilation. Not really, but popular broadcast texting site Twitter was down, which probably made some ‘tweens sad. If you're at least old enough to vote, you likely didn't notice, or at least, noticed only enough to say, "Twitter? What's a twit? Is it tweet? How does one decline this verb? Tweet, twitted, twitten?" But, much to the relief of jittery texters worldwide, service appears to be back to normal.

"Twitter Down for 120 Minutes: Kids Forced to Use Email" seems to us a candidate for the bottom story of the year, had unemployment not been a slightly-less-bad 9.4% in July. Yet, stocks surged on the news, capping off the 15th positive week for US stocks (16th for the world) out of 21 since the bottom. US stocks are now up 51% since March—world 57%. Year-to-date isn't so shabby either at 14% for the US, 18% for the world.

What insanely positive news is driving this? Unemployment is slightly less wretched than it was last month? Yep—that's how free markets work. It's the bottom news stories that matter. GDP is down, but not as bad as the previous quarter. Central banks aren't moving their short rates. Congress doesn't pass anything. (How is this news?) They don't smack you in the face with obvious official data. That comes later.

But stocks signal better times ahead first. As slightly less grim news starts rolling in, confirming the possibility of a brighter future—it's gasoline on a fire. News like: Revenues are soft, but this is compared to Q2 last year, before Lehman's collapse, and firms could end up seeing renewed profitability on trimmed-down costs—even if the economy stays sluggish. It's possible the quarter will end with 73% of S&P 500 firms beating earnings estimates—by a huge margin (a feat not seen since 2004). Firms thought long dead stagger back to life. Massive legislated redistributions of wealth seem an ever more distant possibility. Politicians get berated.

Taken on their own, initially none of these seem wildly bullish (though we're always pleased to see politicians taken to task). How can one quarter of earnings growth that wasn't as negative as expected explain a 57% pop in stocks? It doesn't—instead stocks are telling us they expect future positive developments.                      

Don't wait for the good news to hit you in the face. Clarity in markets is very expensive and a sign you're late to the party—like twittering only to find the kids have moved on, and Twitter is as passé as Facebook. Or, worse, MySpace.[i] Have a great weekend.

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[i] In the interest of full disclosure, we're not actually sure if any of these things are passé.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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