Soft data like consumer confidence and business and manufacturing sentiment are helping push up stock indexes to record highs.

But what about the hard economic data that indicate industrial production, utility output and commodity prices?

Hard and soft data are diverging, says Tom Forester, chief investment officer of Forester Capital Management in Chicago, so beware the safe feeling that soft data provides.

“Global economic growth and central bank balance sheet growth are both slowing or reversing,” he writes in a market note. “So not only have the fundamentals not kept up with the stock market’s race higher, but the hard data that paint the most convincing picture are pointing to tougher conditions for equities.”

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Central bank balance sheets may be bumping up against the limit of their effectiveness, he says. Global central bank balance sheets are near US$20 trillion, “with little to show for the increase and diminishing returns as the rate of increase slows globally.”

And, with so much growth riding on China, the country’s hard data is worrisome. New projects in China have fallen sharply, he says, with more projects being completed than started. “This can also be seen in new credit flows which are now flat,” Forester says.

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