Economic Recovery
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We Want to Hear From You: Do You Think Booming Corporate Profits Are the Sign of a Strengthening U.S. Economy?
The past few weeks have pulled in one earnings report after another for 2010's first quarter, allowing a better look at the status of corporate profits. Most companies hoped for marked improvements after restructuring and cutting costs in the wake of the financial meltdown that gave balance sheets a beating. And they weren't disappointed: JPMorgan [...] -
A V-Shaped Recovery? Don't Bet On It
Corporate profits appear to have returned in full, manufacturing is picking up around the world, commodities prices have rallied and the Standard & Poor's 500 Index is up about 60% since last March.
That makes a pretty compelling case for what some analysts are calling a "V-shaped" recovery. But even with all the momentum the economic recovery has accrued, that kind of talk may be a bit premature.
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Retailers Make a Surprising Comeback
You may be hearing a lot of bearish commentary centering on the premise that the market's advance is unsustainable because it has benefited so much from government spending.
But one big swath of the rise in stock prices has come from retailers, and it's hard to make a direct link between fiscal spending and chain store sales.
When the government pays for things like more highways and military goods, more people gain employment and then their families go out and purchase things at companies like Family Dollar Stores Inc. (NYSE: FDO) - a position in our Strategic Advantage portfolio that is fast on the rise. But that's really a "second-derivative" concept, as the statisticians say.
Employment and wage improvements have been the big catalysts.
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World's Factories Manufacturing at Record Rates, Fueling Global Economic Recovery
The world's factories are churning out products at record rates, fueling the global economic recovery at a faster pace than thought possible just a few months ago.
The latest figures show factory output is growing at a record rate from the United States to China to Europe and beyond. And as manufacturing expands, economists expect the world's economies to continue to expand, creating jobs and putting money in consumer pocketbooks.
As long as companies have plenty of cash to finance expansion, output from the world's factories should continue to grow, according to Money Morning Contributing Writer Shah Gilani, who recently launched the Capital Wave Forecast, a new trading service based on capital flows.
Recent surveys show U.S. companies are sitting on almost $1 trillion in cash.
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JPMorgan Posts Big Gains but Financial Reform Threatens Profitability
JPMorgan Chase & Co. (NYSE: JPM) posted a 55% rise in first-quarter net income led by fixed-income trading and investment banking. But to ensure its profits remain in tact, the bank continues to fight against proposed financial reform.
JPMorgan, the second-largest U.S. bank by assets, beat analysts' estimates with net income of $3.33 billion, or 74 cents a share. Estimates averaged 64 cents a share.
Investment banking brought in $2.47 billion, 74% of total net income. The area is usually a strong contributor to profits, kicking in 57% in the previous quarter and 75% in the first quarter of 2009.
JPMorgan claims the results are a strong indication of global financial economic improvement.
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Financial Reform: Three Ways to Fix Wall Street
The financial-reform bill introduced by U.S. Sen. Christopher J. Dodd, D-CT, seems likely to pass both houses without all that much alteration.
And that should immediately raise our suspicions. After all, the U.S. financial-services business has a very effective lobby, so if there isn't huge opposition to the legislation, it probably won't achieve all that much.
It won't fix Wall Street.
But there's another issue here: It's also not clear to me that we know just what we want the financial-reform initiative to achieve. By that, I mean: What banking-sector reforms would we implement in an ideal world, to reduce the danger from the sector while preserving the essentials of a free market?
To see Martin Hutchinson's blueprint for fixing Wall Street, please read on... -
Question of the Week: Overlooked Problems Will Kill the U.S. Bull Market
The U.S. stock market has staged one of its most powerful rallies in history, zooming nearly 70% in the 12 months that followed the March 9, 2009 market low. U.S. stocks soared another 5% during the first three months of 2010 - its best first quarter in a dozen years. But where do we go from here?
Between the New York Stock Exchange continuously reaching new highs, the Dow Jones Industrial Average rising up along its eight-day average, and a rebounding retail sector, there's reason to celebrate what appears to be a market recovery offering investors profit opportunities.
"You can't bury your head in the sand and ignore what's happening," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "If you did that, you've missed a 60%-plus rally in the [Standard & Poor's 500 Index] since early last March. You cannot fail to acknowledge what's happening" in the markets, even though top traders understand that cheap money from the government bailout - and not a well-rounded economic recovery - is most likely behind the torrid run-up in U.S. share prices.
Money Morning Question of the Week: Is this a true bull market? A year from now, are U.S. stocks - as measured by the Standard & Poor's 500 Index - trading higher, lower, or at the same level as they are today?
What follows are some of the most well thought-out responses we received (as well as a previous comment regarding the bull vs. bear market argument posted on our Web site) with many agreeing this bull market is too good to be true.
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We Want to Hear From You: Are You Confident in the U.S. Employment Outlook?
The U.S. unemployment rate held steady at 9.7% for the third straight month in March as the world's largest economy added jobs at the fastest pace in three years - the most-certain sign yet that the worst job market in a generation is finally improving, economists say.
Factories, retailers and hospitals stepped up their hiring, and the overall employment market got a boost thanks to hiring related to the U.S. Census. Overall, the economy added 162,000 jobs for the month, with about a third of those gains coming from the Census. The private sector added 123,000 jobs, the most since May 2007. And the outlook ahead is good, since about 700,000 Census workers will be hired for the formal U.S. population count this spring.
"This recovery is for real," Chris Rupkey, an economist at The Bank of Tokyo Mitsubishi UFJ Ltd., said in a statement.
Still, there are causes for concern.
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Why the Outlook for U.S. Stocks Could be Much Better Than You Think
Could the U.S. bull market actually be for real?
That's the question investors have been asking since U.S. stocks essentially bounced off of their March 2009 post-crash lows - only to be launched into one of the strongest rallies in U.S. market history.
More than a year later, U.S. investors still don't know what to believe - or what to expect, says Jon D. Markman, a market commentator and best-selling author who is also a Money Morning contributing writer. The most recent sentiment poll by the American Association of Individual Investors, or AAII, showed that only 41% of investors are bullish. Cash flows at mutual funds that invest in U.S. stocks are telling a similar story, with a $5.1 billion monthly outflow, Markman says the most recent data shows.
