Kevin, I agree that the Intel news (actually, HWP made similarly positive comments the other day about revenue prospects) and employment numbers (plus Euro rate cuts) should ease recession fears spurred by layoff announcements, Japan and Brazil fears. If the US (and Europe) can avoid a recession, the positive effects on earnings over the next few years from any recovery in the rest of the world could be quite dramatic.
That said, much of the market (large caps) is still (again) extremely overvalued. The PE on the S&P 500 now stands at 30.5 on trailing earnings that are actually down 6% from a year ago. Also, as the employment numbers seem to confirm, much of the US manufacturing sector is hurting. Domestic demand is strong, yes, but weakness in exports and competition from cheap imports obviously hurt them. If something doesn't happen to stimulate demand in Asia and Latin America, our weak manufacturing sector could still drag us into recession.
IMO, the IMF isn't helping things in Latin America either. They want "austerity" in Brazil, but the problem there is not inflation or overstimulated demand. Yes, they need to reform their crazy social security system, but consumers there are afraid to spend money. Given the size of their economy, lack of demand is a significant drag on economies from Argentina to Asia to the US. They need stimulus and tax reform, not tax increases and budget cuts like the IMF wants.
Just some thoughts.
Bob |
