2009-05-04 17:05:49
Is the "Great Recession" Over?
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Is the recession over?
Many investors certainly seem to think so, as the markets have been on an absolute tear over the past couple of months.
The S&P 500 has turned positive in 2009. The Dow Jones Industrial Average is almost 2,000 points off of its March lows. Even the housing market, which set off the "Great Recession" in the first place, has shown some signs of stabilizing over the past couple of months.
Did we just live through a V-shaped recession, and are now on the road to recovery?
Is this a W-shaped recession, meaning that the "recovery" will soon fade away and lead to more pain?
Or are we struggling through an L-shaped depression, similar to the one seen in Japan in the 1990s?
Is this a very strong bear market rally, or the beginning of a new bull market?
If you watch CNBC during the day, then you will quickly get the feeling that the worst is behind us. However, many smart people seem to think that the markets will pull back, and that this will prove to be a bear market rally.
There are still many questions that need to be answered before we can determine if this rally has any real lasting power:
1. What will be the results of the "stress tests" that are set to be unveiled later this week?
2. How will the markets react to these results?
3. Can some of the countries that are currently on very shaky ground (UK, Russia, Spain, Ireland) start to stabilize and recover? There is still a very real possibility that one or more of these countries will collapse.
4. Will people start to buy homes again?
5. Will the flood of foreclosures in the United States finally start to abate?
6. Will corporate earnings begin to improve in a meaningful way?
7. Will rising unemployment numbers begin to slow and tick lower, and will the job market begin to improve? It's pretty tough for an economy to stabilize and begin to grow once again if people are losing their jobs in droves.
8. Will the American consumer begin to buy once again?
9. Will people begin to sink their hard-earned cash back into equity markets?
10. What will be the end result of the recent moves taken to save the shattered US auto industry?
Not to be a downer, but there are many questions that need to be answered before the economy can put in a meaningful recovery.
Is the "Great Recession" over?
A better question might be - why would a person want to buy equities right now?
Filed under: General Market News
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COMMENTS
Comment by Mike on May 04, 2009 @ 9:19 pm
What I would really like to know is how come no one knows for sure what this is until after we live through it: V, W, or L?
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