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Recovering Economy

January 28, 2010 – 12:25 pm

For months we have been seeing improvement in our economy. We have pulled ourselves out of the recession. Don’t expect the government to tell you about it for some time. It took them almost a year after we were ‘in’ the recession to tell us we were ‘in’ a recession. The government is always slow in making those calls.

Though we are out of the recession the stock market is not convinced about the strength of the recovery. History teaches us that the stock market is the best leading economic indicator there is. When the market started to improve in March it was forecasting the current recovery in the economy. Now as it slows its upward move and even starts to correct it is uncertain about the future. Certainly, a slow down in stock prices is expected and a return to a normal market with normal volatility is going to be part of 2010. Though 80% of all reporting companies are beating their expectations, we wrote last week that this good news would not necessarily translate to higher stock prices. That good news was built into stock prices already.

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