The broad indices are less important than individual stocks, unless you are buying index funds. Even though some of the recent earnings reports are encouraging, overall earnings are limited by higher federal, state, and local debt, continued high unemployment, plus growing underemployment, and higher state and local taxes, virtually cancelling out the tax cuts at the federal level.
As for business investment, it is growing hardly at all. The only part of the industry that looks strong are parts of the semiconductor sector (telecommunications and flash memory), and of course, oil and gas. As the U.S. debt increases, I expect treasury funding to cause long term interest rates to rise, further dampening the recovery.
Some recent earnings estimates on domestic oil and gas producers seem to me to be very, very conservative. As for gold, I confess I am at a loss to predict where prices will head. The major factor in gold has been the weakness of the dollar against the Euro and yen, and this seems to be stabilizing at the moment. The other major factor has been panic buying, which subsided somewhat after troops moved into Baghdad.
I would welcome any comments agreeing or disagreeing.
Art |
