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Kevin Fusco: Lost in shuffle, ‘hard’ data showing progress

For the past few years, a distinct divide has existed between Wall Street and Main Street.

Some could argue that this separation has helped to create and further the social protests exhibited recently in New York, and now across the globe.

What people, and more directly investors, see and feel when they look at the financial world around them is measured by sentiment, and creates “soft” data. Investors’ moods are affected by what they see on television, in newspapers, on the Internet and radio, and what they hear from friends, family, and neighbors. Lately, the media has been thriving on bad news about virtually every topic.

What has gotten lost in the shuffle, though, is the “hard” data, which statistically measures what consumers or businesses are actually doing. Hard data points do not measure feelings, but rather actualities, like homes sold, cars produced, jobs created (or lost), imports/exports, and revenue earned.

Found in these figures are factual results. Recently, many of these results have been positive, and many have beaten expectations. Some of the hard data is even downright bullish, such as recent earnings reports for the third quarter, which have seen a roughly 70 percent meet-or-beat rate thus far.

Unfortunately, much of the good news has been overshadowed not by outright bad news, but the sentiment that things are not going well in the economy or financial markets. Yes, there are legitimate areas of concern, but the vast disconnect has gotten wider at a time when actual results are getting better, and this may work against investors who ignore the good just to escape the perceived bad.

Investors, consumers and businesses looking for a perfect time to invest in the financial markets or their own practices will never find such an opportunity, as there is seemingly always something to cause concern and anxiety. Successful investing often requires investors to weather tumultuous and volatile times in order to prosper in recovery markets.

Recent market trends, which are similar to patterns exhibited just last year, and to an even larger degree in 2008 and 2009, are ripe with opportunity for the willful.

For investors, relying on a solid asset allocation framework and dedicated investment objective will help combat volatility and provide balance between feelings and emotions, and facts and fundamentals.

For small business owners and entrepreneurs, there are far fewer proven ways of escaping economic volatility, but if publicly traded companies serve as any example, cost-cutting measures, whether through budget tightening, reducing benefits or layoffs, generally serve as the most efficient, if not painful, way to sustain activity through bottoming business cycles.

This is exactly what many Fortune 500 companies did in late 2008 and early 2009, and as recent results have illustrated, it worked quite well for their bottom lines.

The Wall Street/Main Street divide will likely continue for some time as investors struggle to find a balance between their emotions and actual data.

In the meantime, savvy investors will be looking to take advantage of short-term market movements and opportunities, while the average investor spends more time avoiding perceived risks and trying to find footing between “soft” data and “hard” data.

Kevin Fusco is senior vice president of Fusco Financial Associates Inc. of Towson. He can be reached at 410-296-5400, extension 109, or [email protected]