Economic Woes?
The market has had 5 week down weeks in a row. You hear a lot of negative news out there. I hear these things and worry too. It's a part of the human condition.
The points I make below are not just comments - each one is based on a chart(s) I reviewed of actual data presented by a very competent analyst.
Fortunately, I have some very smart, honest, fact-driven sources of information that provide an objective analysis. They are not trying to sell books, get more viewers, or "clicks", or be in the news limelight like so many of those that make statements that frighten or excite people.
The Purchasing Managers Index was only 58 when it was expected to be 62. 58 is still growth. In mid-90's this number fell below 50 at least twice and there was no recession. It's a volatile number. Yet the media jumped on this number and made a big deal out of it.
Japan Tsunami Impact: this is a real impact, a lack of auto parts from Japan caused manufacturing and auto sales to drop considerably. It will cause Q2 GDP to be a full 1% lower, but then will cause Q3 GDP to be 1.3% higher, as parts arrive and things bounce back. (These are estimates based on averaging several economist predictions.)
Jobs/Unemployment: In the last few recessions, joblessness peaked well after the recession had ended. So even our jobs situation is not that unusual. It's a lagging indicator.
Future indicators of inflation are still not showing any serious warning signs. TIPS (treasury inflation protected securities) - a good indicator of future inflation are not showing any signs of future inflation. (That can and probably will change as we've been close to historic lows for a long time.)
Gas Prices: Between the last two recessions, gas exploded in price and a recession did not occur. It wasn't gas prices that caused the most recent recession - it was the mortgage mess. Certainly gas prices have an negative impact, but gas prices alone have not caused recession.
In general after a slow summer, reasonable experts expect a resumption of somewhat steady growth after the current slower growth rate. One of my sources says that we are "in the 3rd inning" of the economic recovery.
How soon we forget. On 8/13/2010, after another "summer soft patch" and subsequent 15% market correction, well known economist David Rosenberg said ,"I think it (double dip recession) is...a virtual certainty." The market proceeded to go on a nice run-up! Perhaps a reader might volunteer to call Mr. Rosenberg and have him make another dire prediction? :) |
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What to Do Next
Call us if you have questions and to get the real scoop on what's going on in the market. Be careful watching too much news. You never know if the current source of information is sincere, misguided, trying to sell something, trying to get a reaction, etc. Keep in mind that those that broadcast on TV, put content on internet or put content in print are all salesman -- they are trying to put something intriguing and interesting out there that will draw people. Common sense analysis of economic data doesn't always sell very well! In fact, it can be quite boring. I'll save you from having to watch the boring folks - just give me a call and I'll share with you the latest I've heard. |
