Interest rates have been rising this year. The 10-year Treasury yield hit a 24-year high this week. The average 30-year mortgage rate recently crossed above 7%.
Energy prices have also trended higher. The average price of a gallon of gasoline is at record levels for this time of year. Inflation got hot enough that the Federal Reserve recently hiked its benchmark short-term interest rate in an effort to rein in prices.
Consumers are very much aware of all this, as reflected by poor consumer sentiment surveys.
Hearing all this, you might conclude the economy should be deteriorating and the stock market should be way down.
But the economy is holding up pretty well. In fact, the Atlanta Fed estimates GDP grew at a 3.7% rate in Q3. Meanwhile, the stock market has been remarkably resilient, with the S&P 500 up 13% year-to-date. This index is down just 1% from its record high set on Aug. 13.
This is not a mistake. It’s not some conspiracy. And it’s not craziness.
The truth is that while some things have been getting worse, other things have been getting better.