In This Market, Hope Is a Hazard

"Abandon hope, all ye who enter here." As readers of Dante know, this is the inscription above the very gates of Hades that lost souls read before they enter the upper circles of torment. It might as well be inscribed above the portals of stock exchanges and brokerage houses these days.

Every day, I read a new article or see a new commentator who expresses a view that the worst is over and that the market is set to begin a march to new highs. All is well. To me, this flies in the face of reality.

The retail sales report makes the picture abundantly clear, if anyone is paying attention. Retail sales rose for the month of March. Ordinarily, that would be good after the steep declines in February. However, a look at the report tells an economic tale that anyone who is bullish needs to consider carefully. Virtually every category was down except for increases in food and gas.

Consumers were not spending money on clothes or appliances. What are up are food and gas sales. They were not up because people ate and drove more. They were up because the price of food and gas are up. Amazingly, stock futures actually rose this morning when the report was released. Traders may think this is good. They appear to be the only ones.

The Hits Keep Coming

The University of Michigan consumer confidence report released last week showed that consumer confidence was at its lowest levels in 26 years. Back then, in 1982, we were coming out of a long period of economic turmoil, and the Fed chairman, Paul Volcker, had raised interest rates to curb inflation and bring stability back to the system. The morass had been going on for the entire second half of the 1970s.

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At the time of publication, Melvin had no positions in stocks mentioned, although positions may change at any time.

Tim Melvin is a writer from Stevensville, Maryland, who spent 20 years a stockbroker, the last 15 as a Vice President of Investments with a regional firm in the Mid Atlantic area. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Melvin appreciates your feedback; click here to send him an email.