Jobless claims and continuing claims have peaked. Housing has bottomed. Auto sales are turning up. The alphabets (ISM, LEI, NAPM, MBA purchases, ICSC retail sales, etc.) are improving. The recession has bottomed. Hurrah.
Now what?
Historically, the past recessions since WW II had textbook stock recoveries. The recession ends and stocks rally as the economy recovers. The last recession ended in November, 2001. However, the stock market subsequently plunged. It hit lows in July, 2002 and October, 2002. It finally bottomed in March 2003, almost 1.25 years after the recession officially ended.
The last 2001 recession wasn’t even a recession (did we even have 2 consecutive down GDP months?). It lasted only 8 months. Yet, the S&P dropped 49% from peak to trough from March 2000 to March 2003. Three years.
Can we duplicate another housing, consumer spending, home equity withdrawal boom to recover as we did from 2003-2007? We must remember that 70% of the GDP is dependent on the American consumer. How is he doing?
It has been one year and 8 months since the October 2007 market top. Only one year and 4 months to go to equal the last bear market duration. Greenspan kept fed funds below 2% for 3 years. Can Bernanke continue to just pin rates at near zero for years until we recover? Why not? Seems so easy, doesn’t it? Has the government pumped in enough money to mark the S & P stock market the low in March at 666?
Fred Crossman, J.D, C.P.A.
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