October 12
Against a wall of worry the stock market made new highs for 2009 last week, as the first earnings reports indicated that top line revenue and bottom line earnings may well both be improving. This would provide another indicator that the recession may well be at its end or over already. Confirmation this week by additional positive earnings reports should confirm the first rise in retail sales for the first time in 13 months as another positive economic indicator. Investors are truly at the cross roads – investing in government bonds remain at negative inflation adjusted returns; corporate bonds at these rates may well lose value if interest rates increase as economic activity increases; municipal bonds are influenced by 50% of the Federal stimulus funds covering municipal budget deficits and stocks have already risen by more than 50% in a straight line since March. Commercial real estate seems to be hanging over a cliff, but residential real estate, especially in the lower price ranges seems to have stabilization and have even shown some modest increases, but also remains under the cloud of additional foreclosures as governmental modification programs don’t seem to have had the desired effect.
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