Do you know about - Good News - The stepping back Is Over
Fed Interest Rates! Again, for I know. Ready to share new things that are useful. You and your friends.The National Bureau of Economic study declared the recession over in June 2009. I am not doubting the calculation, but man needs to let the housing store and corporate America know. The unemployment rate stands at 9.6% and agreeing to the August data we are still losing jobs. The housing store isn't doing much better with the price of homes still declining and the homebuilder sentiment as report lows. If the recession ended 15 months ago where is the enhancing economic data?
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Main street has a separate understanding relative to the outlook for the economy. Its benchmark tends to revolve around jobs, income, and opportunities for advancement. On all three accounts the photograph is not pretty. Thus, the negative report on buyer confidence last week. There may be some optimism in the markets, but the feeling on main street is still fairly pessimistic. In fact many economist are still calling for a second dip of the recession before it gets better.
The Fomc meeting yesterday offered concerns relative to deflation. A growing cheaper generally struggles with inflation? I understanding the recession was over? Reading the comments from the Fed after the meeting was not encouraging. In fact, investors didn't know how to respond. Look at a chart of the Volatility Index the last 90 minutes of trading and you see the scrambled reaction. Gold was down heading into the announcement, but move up to 94 following the comments. The dollar fell to .33 on the euro and interest rates on the 10 year Treasury dropped 12 basis points to 2.59%. Not normal reactions to a obvious economic environment.
Investors have been buying into stocks in confidence the recession is over and the cheaper is on the mend over the last four weeks. After testing preserve at the 1040 level the index has moved straight through resistance at the 1130 mark on the S&P 500 index. The gains were prompted by enhancing manufacturing data and enhancing economic data globally. If we were to dissect the word enhancing we would see the numbers were up slightly in August. They were sufficient to keep the negative discussions relative to a stagnate cheaper at bay. For example, Ism Services for August were 51.5%. Anything over 50% shows expansion. That is very modest expansion for the services' sector. The Ism Manufacturing estimate for August showed a similar growth above 50% and the store rallied on the news. But, when the Federal preserve Governors put out statements relative to deflation, investors have to rethink their views on growth seeing forward. Depending on the psychological toll of those comments, the market could test the new move higher.
The confidence of the investor took a gut punch from this report by the Fed. The data points will finally resolve the reality of the economic growth or retraction, but in the meantime sentiment will drive the day to day activity. The sentiment has been on the rise along with confidence in a modestly enhancing economy. It is like getting hit by a pitch in baseball. The coach says shake it off, but next time you step in the batters box the understanding is still there. Investors will exertion to shake off these comments, but browsing straight through the headlines this morning they are focused on the comments from the Fed and the meaning. They will go away with more data and time, but the short term reaction is worthy of our attention.
The data from the National Bureau of Economic study may say the recession is over, but the saving process is still a work in progress. Investors will have to put blinders on and ignore the day-to-day chatter if the store is heading higher. The short term impact is likely to be a confidence check in the form of a pullback. They will have to shake it off and get back in the batters' box and hit away. Don't be surprised if they bailout on a few curve balls in the meantime.
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