Archive

Daily Analysis | About

Economic Review

8/17/2009

After non-stop hype over the past few weeks, a little reality check is always nice.

You’ve all heard the jawboning from analysts, economists and traders mentioning that the “recession is over”, referring to the fact that Stocks were pricing in a return to growth in the near future. Factors such as some increased auto sales resulting from the cash for clunkers program, some slightly better than expected housing data and some OK earnings reports, got the bulls on stocks and the economy sounding the bells that all is better.  However, last week brought a series of reports and events that clearly did not support this notion.

Retail data came in anemic, Initial unemployment claims indicated that joblessness continues to increase and consumer sentiment information was disturbing.  What you had was a reality check on what is really transpiring in the economy as opposed to what has been hoped for. Simply put, the US consumer, who has been the cornerstone for US economic growth, is retrenching into survival mode regarding consumption patterns as significant uncertainty as to their stability of income remains a factor.  The early trade in global equities this week has taken notice to these data series and the results have included some sharp declines.

So you may ask yourself….why did Stock prices rally so impressively over the past few months? Probably the same reason why they rose back in 2005 and 2006 only to be decimated on reality….misperceptions on the state of the economy.

Daily Analysis | About