Much of the media has been focused on signs that the U.S. is headed toward recovery from what has been the worst recession in years.
According to a recent article in SeekingAlpha, the downturn in the housing market, “which drove the world into recession, is showing signs of bottoming out.” Since that time, “an amazing $4 trillion in U.S. home equity has vanished. Home prices edged up in May, bringing renewed hope that the 40% plunge in house prices might be coming to an end.”
Other signs of a possible bottom – the price of crude oil. According to Bloomberg, “Crude oil traded above $71 a barrel for the first time in a month on signs that industrial activity is picking up and may trigger a recovery in fuel demand.” Analysts expect the U.S. manufacturing index (numbers due out later this week) to show “conditions in July were the best in almost a year.”
Experts say one big factor working in favor of a recovery is that businesses cut inventories to the bone, which, means some replenishing is overdue. "The shape of the recovery is still in some doubt, but for growth the handwriting is on the wall and the outlook is a positive one for the second half of the year," said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi in New York.
Others say the American Reinvestment and Recovery Act is also helping push the U.S. into recovery mode. Lawrence Summers, director of the White House Economic Council says the $787 billion stimulus program is laying the foundation for a recovery.
However, there are still troubling signs that a recovery could be further out. For example, Reuters reports, “data released last week showed the recession that began in December 2007 was even deeper than initially thought, ranking as the worst since the Great Depression of the 1930s.”
Even Federal Reserve Chairman Ben Bernanke urges caution as to possible signs of recovery. Last month Bernanke said “the outlook for the long-suffering U.S. economy was improving, but supportive policies would be needed for some time to prevent rising unemployment from undercutting recovery,” per Reuters.
Taipan's New Growth Investor editor Zachary Scheidt warns readers not to get too hopeful we’re heading into recovery.
“We’re not out of the woods just yet, but we may have found a clearing,” says Zach. However, he also reminds readers that “one of the most dangerous things you can do as an investor is chase performance”:
Typically, individual investors (even those who claim to “buy and hold”) end up underperforming the market because they buy at exactly the wrong time. Just like it is foolhardy to sell when everyone else has already panicked, it’s also a poor investment process to buy just because the market is higher.
Adds Zach, “And that’s why you’ve seen us avoid stocks that are affected by consumer spending, employment numbers, or stocks that need a strong tailwind to make progress.”
You can learn more about New Growth Investor here.
Other Articles Related To This Topic:
