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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Lee who wrote (3468)7/10/2002 9:46:07 AM
From: Robert Douglas  Read Replies (1) of 3536
 
The story at the moment is a dollar, bond market, and stock market that signal a continuing recession while the income statistics and most economists say otherwise. Who is right?

The most unusual of three three is the stock market. The S & P 500 is very faithful in calling recession troughs. I think the rally we had off the September lows was the market telling us the recession was over - which I believe it is. The decline since then is possibly related to other issues like the dollar and the accounting messes. I don't think the stock market is signaling a double dip although if it occurs, the market is going to look like a brilliant indicator!

As for credit problems; you'll always see these at the economic troughs. That shouldn't come as a surprise and isn't an indication that the economy is sick. Lenders are justifiably cautious at these times and the loans they make are usually sound and build the foundation for a lasting recovery. The temptation is to call for massive lending to return us quickly to the economic boom that preceded the current bust. This is the wrong medicine. What we want is a lasting recovery based on sound fundamentals. I have all the confidence in the world that this recovery will build slowly and last for many year. It may even last the entire decade.

Additionally, I think the rest of the world will be a part of the coming recovery. We have seen the first worldwide downturn in 50 years and now it's time to see the opposite. The stock market should take kindly to this environment, IMO.
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