Market drop defies economic reality

The stock market may be falling but economic growth is probably stronger than we think.

Summary: I’m not worried by this latest market rout I have seen nothing to change my view that the economy is much stronger than the official statistics show. The RBA’s head of economics recently noted the high probability of growth being stronger than we think. The unemployment rate is almost certainly lower than the ABS reports, discretionary consumer spending is very strong and housing construction is surging.

Key take-out: If there were genuine signs of some economic imbalance around the globe like in 2006 I might be more concerned. As it is, investors should have confidence to take advantage of market gyrations and invest for the longer term.

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