In light of the market’s wild gyrations in recent months, we’ve decided to introduce a second, mid-week Market Update to keep you apprised of our thinking
The evidence continues to mount that we are pulling away from extremes. Among the gloomy picture drawn by most economic numbers, a few scattered data points show that we may not be in such a dire situation as the pessimists think.
First, the market itself is beginning to act better. Daily volatility is declining, and the S&P 500 is up strongly from its November lows.
Second, the evidence is mounting that some of the liquidity infused by the Fed in our banking system is beginning to spill into the economy. Since the crisis we are living through is addressable with money, it is essential for this money to find its way from the banking system into the hands of people and into companies’ coffers. This is beginning to happen, with M2 on the sharp rise again.
Third, retail sales don’t look as grim as unadjusted numbers indicate. Underneath the surface there’s some consumer strength, especially if you exclude gasoline from the reported numbers. With gasoline sales down for a good reason, retail sales will actually be increasing. Overall consumer spending in the U.S. also fell less than was forecast.
There are also signs of commodities bottoming.
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