More from BCA: Candidates Toolkit | Employers Toolkit | Interim Employers | Interim Candidates | Jobs
Recent Placements
The Panic is Over
Buyers are shopping for stock bargains.
Buyers are shopping for stock bargains.
by Brian S. Wesbury & Robert Stein • June 6, 2009
While some forecasters believe a rising jobless rate and more housing foreclosures could kill off a nascent recovery, we believe the panic is over and a V-shaped economic recovery is under way. It is in its earliest stages, which means plenty of economic indicators have yet to turn positive, but the signs of a strong bounce off the panic-induced lows are all around us.
Since bottoming in February, consumer confidence has had the fastest three-month increase on record. The Institute for Supply Management’s manufacturing index, which fell to historic lows over the winter, has risen to signal that the overall economy is now expanding. The Richmond Federal Reserve index, a measure of manufacturing in mid-Atlantic states, is showing growth. Container shipments both into and out of the ports of Los Angeles and Long Beach—key measures of international trade—have traced a V-shaped recovery.
In the financial markets, the yield on the 10-year Treasury note is back up to 3.86%, almost exactly where it was in August 2008, just before the crisis hit. The VIX Index—a measure of stock market volatility and risk—has also traded back to levels not seen since August 2008. Meanwhile, key commodity prices, such as oil, copper, lumber and gold are well off crisis-period lows.
In general, the economic scene is quickly returning to where it was in September 2008, just prior to the collapse of Lehman Brothers (LEHMQ - news - people) and the ensuing sudden slowdown in monetary velocity. True, the official arbiter of U.S. recessions, the National Bureau of Economic Research, says the recession started in December 2007. But we think that had it not been for the events of September 2008, a recession never would have been declared at all.
In the last full calendar quarter before September (the second quarter of 2008), real gross domestic product grew at almost a 3% annual rate. Now, after a second quarter in which real GDP has been kept negative by rapidly falling inventories, an annual growth rate of 3% is exactly what we expect for the third quarter of 2009, with even faster growth in Q4 and then in 2010.
With Treasury bond yields and the economy returning to pre-panic levels quite quickly, investors are left wondering about stocks. Will they return to September 2008 levels of roughly 11,000 on the Dow and 1,200 for the S&P 500? And if they do, how long will it take for them to get there?
While some forecasters believe a rising jobless rate and more housing foreclosures could kill off a nascent recovery, we believe the panic is over and a V-shaped economic recovery is under way. It is in its earliest stages, which means plenty of economic indicators have yet to turn positive, but the signs of a strong bounce off the panic-induced lows are all around us.
Since bottoming in February, consumer confidence has had the fastest three-month increase on record. The Institute for Supply Management’s manufacturing index, which fell to historic lows over the winter, has risen to signal that the overall economy is now expanding. The Richmond Federal Reserve index, a measure of manufacturing in mid-Atlantic states, is showing growth. Container shipments both into and out of the ports of Los Angeles and Long Beach—key measures of international trade—have traced a V-shaped recovery.
In the financial markets, the yield on the 10-year Treasury note is back up to 3.86%, almost exactly where it was in August 2008, just before the crisis hit. The VIX Index—a measure of stock market volatility and risk—has also traded back to levels not seen since August 2008. Meanwhile, key commodity prices, such as oil, copper, lumber and gold are well off crisis-period lows.
In general, the economic scene is quickly returning to where it was in September 2008, just prior to the collapse of Lehman Brothers (LEHMQ - news - people) and the ensuing sudden slowdown in monetary velocity. True, the official arbiter of U.S. recessions, the National Bureau of Economic Research, says the recession started in December 2007. But we think that had it not been for the events of September 2008, a recession never would have been declared at all.
In the last full calendar quarter before September (the second quarter of 2008), real gross domestic product grew at almost a 3% annual rate. Now, after a second quarter in which real GDP has been kept negative by rapidly falling inventories, an annual growth rate of 3% is exactly what we expect for the third quarter of 2009, with even faster growth in Q4 and then in 2010.
With Treasury bond yields and the economy returning to pre-panic levels quite quickly, investors are left wondering about stocks. Will they return to September 2008 levels of roughly 11,000 on the Dow and 1,200 for the S&P 500? And if they do, how long will it take for them to get there?
Career Opportunities
