Friday, April 24, 2009
The most important thing about a growing list of things that have bounced from year-end lows (e.g., commodity prices, industrial metals prices, oil prices, retail sales, container shipments, home builders' stock prices (+75%), junk bonds, emerging market debt, Apple stock, and now capital goods orders) is that economic activity is not going down a black hole. We are not caught up in a negative-feedback loop that will eventually turn into a depression. Even if all of these bounces only signify a stabilization of economic activity at a lower level, that is a far better outcome than the market is expecting. Depression and deflation fears still rule the roost. The bullish green shoots are becoming so numerous that we have most likely seen the bottom in economic activity. Going forward the issue will be the degree to which the economy recovers—how fast and how durable will the coming business cycle expansion be?
Posted by Scott Grannis at 8:17 AM