Could The Recession End in 2009?

The markets, in desperate need of some good news, finally found some on Tuesday.

The major market indexes roared higher on Tuesday due to some hopeful comments from the Federal Reserve Chairman, Ben Bernanke.

Bernanke told Congress that we are currently working through a "severe contraction", but that the recession may end this year (2009) if the federal government manages to stabilize the banking system.

He also said that regulators don't intend to nationalize banks, which also helped to fuel the rebounds in the markets on Tuesday.

Bernanke's optimistic comments were likely paving the way for more of the same from President Barack Obama tonight. Obama will be addressing a joint session of Congress and speaking about the economic crisis that we currently find ourselves in.

Bernanke's comments come just a day after major North American market indexes sunk to lows that have not been seen since 1997. Is it cynical of me to say that Bernanke was trying to prop up the markets somewhat today?

The Fed Chairman stated that 2010 could turn out to be a year of recovery, and that the current recession may come to an end in the second half of 2009. Again, he noted, this is all dependent on whether or not the banking situation is resolved. Readily available credit is a crucial component of any meaningful rebound, and we won't have that until the banking system has been stabilized.

Bernanke's comments came just a few hours after two more bad pieces of economic news were released.

First off, the Consumer Confidence Index sunk to 25 points in February, which is a ridiculously low number. The Index, which was started in 1967, has NEVER seen a number as low as 25. To put this into context - the reading at this time last year was 76.4.

Second, multiple real estate indexes showed the worst drop on record in the fourth quarter of 2008. The Standard & Poor's/Case-Shiller U.S. National Home Price Index, for instance, fell 18% in Q4 2008 compared to Q4 2007. That is the largest single drop in its 18 year history.

The second half of 2009 is not that far away. Could the recession possibly end by then?

Will 2010 end up being a year of "recovery"? Or is there more pain to come?

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Filed under: The Economic Meltdown | General Market News