Some thoughts on the economy:
Is there going to be a double dip recession? After last weeks economic reports the question is facing everyone who keeps track of the economy, and is lurking in the shadows for those that don't. While many on Wall Street are saying the market has predicted this economic weakness, implying that the previous contrary movement of stocks and the economy shows the market to be correct.
On the other hand, I'm thinking that it is quite possible that stocks themselves, pulled down by factors outside the economy, like faith in the markets themselves, is the primary reason the economy has pulled back down.
At the end of earnings season there is little evidence that most companies have a fundamental problem, so there is much less reason to think that the sale of stock has anything to do with a company's future outlook. But, when the earnings and revenue numbers are rightly or wrongly brought to question about companies that are almost institutions, and foreigners, as well, begin to think our markets are a big scam and pull their funds....; True economics and individual company results have little to do with predicting a recession as much as potentially causing one.
Consumers will buy what they need, and otherwise buy depending on how they feel about their own financial stability. Companies will build products to meet that consumer demand, yet themselves are associating their own stock price with consumer demand, which may or may not be true. We no doubt have been saturated with cell phones, PC's and the like, yet our disposable income remains very high.
So do we double dip? I have no idea, nor do I believe anyone else does either. We need at least another month of data, and a market that doesn't anchor the economy. I suspect that if we do return to a recession it will be harder to pull out of this time, but the good news is that it is likely much of the downside risk has been seen in the stock markets. So the double dip recession will be more about economic data, and less about stock prices.
Sam
