Economic news was good this week for the United States, and many hopeful investors and people on Main Street are wondering if this could be the signal to a market recovery for stocks and exchange traded funds (ETFs). But there are reasons to proceed with caution.
While many would love to hear that the good news is the beginning to an economic recovery and that we’re out of the woods, nobody can say for sure. There is “less bad” news, but are the troubles really over? At best, we can expect this to be the “beginning to the beginning of the end of the global recession,” however, there is much recovery still needed to call an “all clear.”
Justin Fox for Time Magazine has reasons why we must still throw caution to the wind:
- The numbers still aren’t all positive, and a few good days does not mean that the bad ones are behind us. For example, the durable goods numbers on Wednesday, up 3.4% in February, but from a January number that had been revised downward.
- “Noisy” data with flaws and mis-measured numbers, along with random chance. Note the above “up 3.4%” but from a number that was revised downward.
- Housing and consumer spending may be on the slow mend, but other areas of the market are crumbling-especially the plunging labor market and high unemployment.
- The center of the recession has gone from the consumer to the corporate sector. This could be passed back to the consumer again.
- Earning season is just around the corner, and it isn’t going to be pretty.
- The fourth-quarter GDP numbers continue to be revised downward.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.