A lot of economic news over the past couple of weeks indicates the worst is probably behind us. Computer orders are up, machinery orders have at least temporally rebounded and it appears that durable goods orders are beginning to improve.
Here’s one overlooked story that indicates things are definitely turning. Operating profits in nonfinancial corporations rose from 7.7 in the spring to 8.7 by the fall. Overall operating profits dropped 10.7%, but the vast majority of the decrease can be attributed to the $184 billion plunge in profits from financial services. While the financial sector has struggled, the remainder of the economy is ahead of the curve in managing their resources.
Most margin rebounds appear after a recession ends. We should all remember that a lot of enterprises are handling this difficult period in a very pro-active way and that the troubles of the financial sector are not representative of the entire economy.
If the troubles in the financial and auto sectors can be somewhat resolved in the next few weeks, the worst should be over. The performance of the stock market over the past couple of weeks is a reflection of this optimism and the growth in the money supply (up an astounding 22% over the past 6 months) will push the economy and the stock market into positive territory.
Spring brings renewal and it definitely appears that the economy is beginning to show signs of new life as well.