Yesterday I had the opportunity to talk with a few analysts from Davenport & Company. To two different people, I posed the question: What are your views on the market? Do you think it’s in a good place? The first answered that he thought that select sectors were doing well while the rest of the market lagged behind, but the market was overall in a better place. The latter of the two also said that he thought the market was doing well.

It is difficult to believe that the market is doing as well as people have been trying to make it out to be. Has it improved from 2007,2008,2009? Yes, but it sure isn’t doing as well as pre-2008. I understand that the markets (Dow, Nasdaq, S&P500) are all far higher than they have every been since their inception. However, our current market is almost purely artificially inflated.

When I say artificially inflated I don’t mean that the government is pumping in money to the markets or manipulating it (other than Quantitative Easing). I mean a very few select stocks (think well performing companies with massive market caps like Apple, Google, Amazon, and Facebook, and extremely high performing companies with lower market caps such as Netflix which has increased 185% in the last year ) have kept the S&P in the green.

The S&P500 is the index that institutional investors look at. It has 500 of the best performing companies from all of the imaginable array of businesses. The fact that less than ~10% of the S&P is what is keeping the rest of it afloat is mind blowing. It puts into perspective how wounded this country still is and deep and jarring a wound 2008 and the bank crash left our markets.

The U.S. economy however, has not only recovered, but is also becoming stronger every month, as more and more people find jobs. The unemployment rate in May of this year was 5.5%, which is close to the ideal unemployment number of ~4% as defined by Adam Smith. If more people are employed – that means they have money. If people have money that means that they are going to spend it. If people spend money, then they are putting it back into the economy, helping the slow but steady regrowth of the U.S. economy.

Bottom Line:

I can’t say when, and I can’t say how, but expect a market crash sooner or later (historically recessions happen ~once ever 15 years, so it’s not too far away.) Unless the S&P500 has failed in being the bar for growth measurement, the markets are doing poorly. However, no matter how odd this may sound after giving such a bleak outlook on the market, the U.S. economy seems to be fully recovered and actually growing much faster than expected.