Today's outlook reminds us of the old Irish blessing, “May you be in heaven half an hour before the devil knows you're dead.” The good news is that the short-term picture looks considerably brighter. For the next month or two, we expect to enjoy a temporary reprieve from the long-term trends. Too bad it won't last.
This morning the euro hit a new four-year low, which ironically may be a positive event for the European countries. It should benefit European exports, which will boost the European economy. That in turn should help put a floor under the euro. Combined with the nearly $1 trillion bailout package announced last week, this should help stabilize the continent's current drift towards recession.
Of course a cheaper euro may not be such a good thing for U.S. exports. Our dollar is an innocent beneficiary of euro weakness and has risen accordingly. However, the business cycle in the U.S. is in a powerful trend. As my friend at the Economic Cycle Research Institute pointed out to me the other day, the group’s leading indicator shows the business cycle is in our favor. One sign of this is the recent uptrend in employment. We've gained 200,000 jobs recently, a move which will inspire more people to look for work and it implies more spending and growth.
Another near-term positive is the recent decline in commodity prices. Copper, oil, and other industrial materials have corrected sharply, which bodes well for business costs.Read more...
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