So it’s official. Investor sentiment in the U.S. stock market has finally reached “euphoria,” according to Citigroup’s widely followed Levkovich Index. The index uses 11 different inputs to gauge how people in the market are feeling, and those indicators say investors are now a giddy crew.
Be that as it may, the core message of the Citi index seems clear: After a rip-roaring year in which U.S.surged by more than 25 per cent and global stocks soared more than 20 per cent, we should now brace ourselves for a bumpier ride ahead.On Friday, for instance, Canada reported that unemployment jumped in March. Conversely, the United States published numbers showing job growth that vastly exceeded expectations.
Making this picture even murkier are worries about the quality of the data itself. One continuing puzzle has been the big gap between how the U.S. economy looks when viewed from two competing perspectives:In theory, these two ways of measuring output should give exactly the same result. GDP gauges the size of the economy by measuring how much everyone has spent. GDI gauges the size of the economy by measuring how much everyone has earned.
Which one of these indicators is right? Nobody knows, but the discrepancy offers good motivation to keep your eye on other signals. Three in particular are keeping me up at night.