The US Markets are now up 4 weeks in a row, Now What? By Ken Mahoney
The recession is over and it ended 15 months ago. Surprised? According to the National Bureau of Economic Research, an independent group of economists, it’s true. In a statement released on Monday, September 20th, the bureau announced that the recession technically ended back in June 2009. As many economists had expected, this official end date makes the most recent downturn the longest and deepest for the U.S. economy since the Great Depression.
So does this mean that everything is back to normal? I think most of us know better than that. According to a new CNN/Opinion Research Corporation poll, 74% of Americans believe the economy is still in a recession. Even the bureau took care to mention that the end of the recession, by definition, is only the period until the economy reaches its low point – not necessarily a return to its previous vitality. They said, “In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.”
So if the recovery began back in June 2009, why do most Americans think we’re still in a recession? Because to many of them, it feels like it. Often, when referencing events that occur in the economy, the words “official” or “technical” are used. Incidentally, you can find both those words in the first paragraph of this commentary. But as we all know, just because something is “technically” true doesn’t mean it’s practically true. Commenting on this, President Barack Obama said last week, "Obviously, for the millions of people who are still out of work, people who have seen their home values decline, people who are struggling to pay the bills day to day, [the recession is] still very real for them." Whether or not you agree with Mr. Obama’s policies, it is easy to see that this statement has some merit. And as long as Americans feel that we are in a recession, the pace of the recovery will be challenged by lower spending, slower hiring, and the like.
On the bright side, the same CNN/Opinion Research Corporation poll found that the percentage of Americans who say the country is in a recession has dropped 13 points since August – a significant spike in sentiment. The stock market is also looking good for the moment, as Friday closed out the week with a surge that put the Dow Jones Industrial Average on track for its best September in 71 years. Even if the recovery isn’t moving as fast as everyone would like, “slow and steady” seems to be its mantra.
Key things to watch this week:
Tuesday – Consumer Confidence
Thursday – GDP, Jobless Claims, Chicago PMI
Friday – Motor Vehicle Sales, Personal Income and Outlays, Consumer Sentiment, ISM Manufacturing Index, Construction Spending
Data as of 09/24/2010 1-Week Y-T-D 1-Year 5-Year 10-Year
Standard & Poor's 500 2.05 3.01 9.32 -1.10 -2.07
Dow 2.38 4.14 11.9 0.85 0.01
NASDAQ 2.83 4.94 13.0 2.50 -3.74
MSCI EAFE 3.26 -1.02 0.68 -0.25 023
10-year Treasury Note (Yield Only) 2.75 N/A 3.38 4.25 5.83
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.
HEADLINES:
Silver climbed to its highest price since 1980 last week, as the dollar’s slump boosted demand for precious metals as alternative assets. Gold also climbed to another record, topping $1,300 an ounce.
The economy expanded at a 1.6% annual rate in the second quarter, and will probably finish the current quarter at a 1.4% annual rate, according to estimates by St. Louis forecasting firm Macroeconomic Advisers.
Legislation pressing China to raise the value of its currency is set for a vote in the U.S. House next week, as Republicans joined Democrats in expressing frustration that the Yuan is appreciating too slowly.
Nearly 11% of mortgages modified under the government's Home Affordable Modification Program, known as HAMP, have fallen two months behind in payments, according to a banking regulators' report issued Friday.
In his first comments on Iranian President Mahmoud Ahmadinejad’s statement that the Sept. 11 terrorist attacks may have been orchestrated to bolster the U.S. economy and “save the Zionist regime,” President Barack Obama told BBC Persian that “for him to make a statement like that was inexcusable. It was offensive, it was hateful,” Obama said, according to an excerpt of the interview released by the White House.
QUOTE OF THE WEEK:
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
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