I think that business is going to pick up before the year expires and continues for a solid two or three quarters at least. My reasoning is quite simple, liquidity. Between now and the end of the year I see a differential of at least $150 B (annualized basis) additions to consumer purchasing power, it consists of $50 B in tax refunds and at least $25 Billions in smaller energy costs relative to the same period earlier in the year. That will translate to an increase of 1% to 1.5% increase in GDP if nothing else happens. But, as it often happen when market turns around, they "grease" the wheel, and such an injection of funds causes increase in economic activity opening "corporate purses". If you assume that corporations are now paying at least 2% less in short term debt cost, they save on an annual basis (assuming about 2 trillions in short term bank borrowing) $60 Billions. Add to that the fact that quite a number of companies have gone to the market for bonds bearing low interest rate (NVLS zero rate and LRCX 4%, just as two examples, between the two of them a cool billion at under market rates), the money is available to fund a reflation of the economy. Consider as well that MZM stands at about $5.5 Trillions and about 16% plus over last year, there is liquidity out there that will, eventually, seek better than zero returns. The time, IMTO, is rapidly approaching to turn more positive on the economy and the market, all is needed is a catalyst. IMTO, that catalyst, as strange as it sound, will be a major market debacle sometime in the next 8 to 10 weeks, which will mark the bottom of the equities market and a little frolicsome period thereafter.
Zeev |
