August 24
As we approach the end of summer, the stock market continues to defy the skeptics by moving into higher territory albeit on lower (predictable for summer) volumes. Doomsday predictions about the Chinese not buying our bonds or hyper inflation destroying what is left of our savings have taken a back seat as the housing market continues to strengthen and show clear signs of a bottom. At this stage the world as we know it does not seem to be coming to an end any time soon. Now the debate is focused on whether the rebound will be strong, weak or flat with even a possibility of a double dip. Considering the fundamentals we have to take into account that the recovery has been based upon lower interest rates, massive global stimulus packages and corporate productivity increases as costs were reduced. These are good steps in the right direction laying the foundation for a more efficient economy with a healthier banking system (with LIBOR and the TED spread at record lows). It does not set the stage for an economic theme that would lead to future growth. Unemployment, 1.8 million homes still in foreclosure and consumers more inclined to save than spend should not push us back onto a downward spiral but equally it is unlikely to spark a healthy recovery. At this stage investment projections for the future could hardly suggest anything but a generally sideways movement in the economy and resulting investment returns.
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