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Stock Market

Bulls On The Run

For the past week, I have been traveling and beginning work on a new project. During this time, a lot has happened on the economic front. While I believe a stock market correction is in the cards, the bulls are definitely beginning a run and the economy continues to improve. While operating profits are down, apparently investors are relieved that the worst did not happen and the prospects for future operating profits are improving.

Surveys indicate that consumers are increasingly confident in the future but still somewhat pessimistic on current conditions. Yes, personal income and disposable income continues to fall but as confidence improves, consumption will begin to grow.

At the worst, the economy has stopped sliding. For those who see things more positively, the economy is now improving. Either way, we have crossed a threshold and the future is definitely looking a bit brighter these days.

Is The Worst Behind Us?

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.