Economic Review

1/04/2010

It’s the first week of 2010 and the name of the game is wild uncertainty for the upcoming quarter.

US equities closed out 2009 with impressive gains as did commodities, precious metals and US fixed Income…hey, even the beaten down US$ managed to rally a tad into year end. But guess what baby…it’s 2010 and its time to allocate money across the spectrum of financial markets all over again.

Stock bulls are riding off of some year end data perks in the form of a short term stabilization in unemployment and OK retail numbers….not to mention momentum and technicals still pointing higher. The real trick of the tape however will be the post holiday period beginning in February, as retailers no longer need holiday workers, and $ strapped consumers face reality of paying for mortgages and daily expenses rather then holiday presents.

Bond bulls are perhaps the most jittery as the prospect of the Fed ending mortgage bailout purchases, and looming affects of a lower US$ and mounds of stimulus money in the system, could just pop the Bond price bubble.

What’s the Doc’s take on all of this??….same old story, which has been quite accurate over the past YEARS, which is massive underlying risk to Stock and now Bond prices. Proponents for an economic rebound have been beating their drums over the past few months, in light of the phantom stock rally, but here’s some food for thought.

The Doc has looked towards the state of affairs in Manhattan as a pulse to what’s in store for the US economy. Unfortunately this pulse is ridden with high commercial vacancy rates, high unemployment, and falling rental rates in residential real estate. Let’s just say, it’s a dismal picture and this often has a lag affect on the rest of the US. Sorry to say, but the Doc remains bearish for any type of real, substantial economic rebound for 2010. January may have some positive signs from the holiday activities, but beware as you go out the calendar.

Stephan Kudyba (MBA, PhD) THE MARKET DOCTOR

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