Despite Obama’s pronouncements of a rough second half of the year, I declare this recession officially over. I looked at the stock market movement, the Dow Jones and NASDAQ averages, and I conclude that the 50 to 200 day market activity indicates an upcoming bull market. Oh yes there will be ups and downs and sideway turns in the market but all in all this will prove to be a bull market. Durable goods orders have been up 3 out of 4 months, corporate capital expenditure is up, and consumer confidence is starting to soar both in housing and in big ticket items. The Fed’s policy of keeping the prime rate low in spite of an inflated money supply should hold down inflation for at least a year or two. Relatively low energy prices should also help temper inflation. Housing affordability is an all time high. I predict that the third quarter will show a small gain in the GDP followed by a much larger gain in the 4th quarter.
At this point, I like the tech stocks sector, natural resources and developing market sector. You can invest 10 to 15% of your holdings in real estate securities if you do not mind the volatility and if you can play with this portion of your holdings for the next 2 years. The real estate sector has been beaten up so badly that it can only go up.
What I do not see improving is the value of our currency. The U.S. dollar will continue to be tested because of the unprecedented Obama budget deficits and the massive trade deficits particularly with China. The unemployment rate is a toss up. I do not have much of a quarrel with Obama’s declaration that it would go up to over 10% before year end, but my prediction is that it would peak at 9.8%.
What does this all mean for the Republican Party? Bad news. In this instance, the free market economy will prove to be an ally of Obama because despite Obama’s incessant attack on capitalism, like redistribution of wealth and the take over the health care system, the free market economy will prove to be so resilient in the face of such an assault that it will remain true to its usual pattern of “a long period of feast and a short period of famine”. Timing is everything and it appears that Obama’s timing is perfect, almost heaven sent. 2010 should be the start of a full economic recovery and 2012 should be a year when the economic recovery gets into full swing. I am still hoping though that voters will have enough sense to vote Harry Reid, Chris Dodd, Barney Frank and Nancy Pelosi out of their respective offices.
This article is not intended to provide financial advice. Please consult your financial advisor before acting on any advice provided herein.
Any opinions and views herein are the sole responsibility of the writer.