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Well it has been an interesting week in the economy. Not a lot has happened but the release of some key indicators are showing a little rebound. Nothing really strong but trends are positive and overall to a slow recovery. The market is all about earnings and earnings have been good. Many key companies are exceeding expectations because management was very fast to cut payrolls, protecting the bottom line. Kudos to management. They did what they are paid to do.
The stock market – Investors/traders - don’t recognize that you can’t shrink your way to greatness. I think that there could be a second round to this recession. It will happen if cities, states and the federal continue to tax businesses and individuals rather than trimming spending. Consumers will come back to the checkout when housing prices stabilize and the unemployment shows even the slightest decline. That will be a while.
In the meantime, Automobiles continue to come forth sporting better and better gas mileage. Good thing since gasoline prices are about to rise yet again, maybe reaching $3 per gallon by winter. Probably more like $2,80 but $3 is a possibility.
The rising energy costs and the weak consumer sales will hurt the earnings and the stock market may well decline again as a result. It is a shaky time and we are in unchartered waters.
Stay tuned, its going to be a ride. Mostly good with moments of absolute fear and terror. But in the long run, the economy will recover. It just will take a lot longer than anyone wants.
