MONDAY AUGUST 24, 2009

V vs. W

The economy is on the mend. The big question now is whether economic growth is sustainable. Those arguing that the economy will experience a “W” recovery, suggest that the economy will weaken once the massive stimulus of fiscal and monetary policy subsides. The end of “cash for clunkers” will provide some insight into this question. Can car sales remain strong without the government subsidizing $4500 of each purchase?


However, I doubt that the stimulus is going away any time soon. Last week, the central bankers of the world met for the annual gathering at Jackson Hole, WY. Clearly, the central bankers showed no interest in pulling the easy monetary policy any time soon. Indeed, most suggested that easy money policy needs to stay for the foreseeable future. Similarly, it is inconceivable to me that Washington will suddenly pull back spending in the name of fiscal discipline. In fact, just the opposite is occurring. Just listen to those calling for yet another stimulus package, even though less than 10% of the last $800 billion package has been spent.

 

Interestingly, the stock market, a leading indicator of economic activity, has certainly had a “V” shaped recovery. The S&P 500 is up 49% since its March 6th low. “V” shaped indeed. Is the stock market forecasting a “V” shaped economic recovery? Despite all the naysayers out there, maybe the economy will surprise everyone on the upside. Wouldn’t that be nice! 

POSTED AT 1899-12-30 16:05:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

RECENT POSTS

Targeted and Temporary


Better Unemployment Number


The "Safety of Bonds" Myth


Just like that!


Ugly August


Bright Side of Double Dip Fears


All eyes on Wyoming


Lack of Business Confidence


Are bonds forecasting a double dip?


Are rates too high?

The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.