CNN today reported the following POTENTIALLY favorable signs of recovery in the economy:
- Housing starts (new construction) were flat from the previous month
- S&P 500 was up 9.4% in April (the DOW is up 15% since April 1)
- Consumer confidence is climbing, up 12 points in April
- Home prices seem to be finding the bottom (but a few more months of data are needed)
- Corporate Earnings seem to be stabilizing, as opposed to hemorrhaging cash
- Initial unemployment claims dropped slightly (but this could reverse quickly)
- Manufacturing shows some signs of life
- Credit Market is thawing, meaning more credit available to the economy
The stock market is volatile, but I would hate to have missed the recent gains. Some bank stocks have doubled in value in recent months (i.e. ZION has gone up 112% since March). Buy low, sell high.
Consumer confidence is important. The fact that this number is increasing is probably the most stable indication of economic recovery.
Home prices seem to have found the bottom. A few more months of data will tell us if this is a temporary anomaly, or if this is the beginning of a stabilizing trend.
Corporate earnings are important for the portfolio, and for the economy as a whole. When companies post profits, their stock prices jump. After posting profits, many companies start hiring and buying again. This has a strong impact on the overall economy.
Initial unemployment claims dropped by 14,000. That is not a significant drop, but it is much better than increasing initial unemployment claims. We must be careful not to over-react to this number. As the economy recovers this number will fluctuate, which is absolutely natural. Only sharp increases should concern us.
Manufacturing numbers are important, but I believe manufacturing will be almost as slow to recover as the housing industry.
The credit market is getting better. Banks are starting to lend to each other more easily. I think the Troubled Asset Relief Program has had a great deal to do with this. It will be a few months before the banks feel confident enough to lend to consumers more. This is all good news.
I believe the economy will show significant improvement over the next few months. Perhaps by late October we will see consumer confidence improve enough to have a good holiday shopping season. If that happens, in March we will look back and realize that the recession ended in December 2009.
I am keeping my fingers crossed, and holding on to my job. :)
