Many analysts have decreed that the worst is behind us as far as the economy and exchange traded funds (ETFs) go. But can we be sure the green shoots are not going to whither into yellow weeds?
The road to recovery is not going to be a fast and smooth one, and it’s not guaranteed, either. Investors lately have been getting a taste of the risks that still remain. Confidence is still fragile.
Mark Gongloff for The Wall Street Journal notes 10 things that could stall or delay a recovery:
- Worries over inflation and higher interest rates are looming, and they remain a large threat to the recovery of the U.S. economy.
- Confidence has been restored in the financial system, however, things are still shaky at best. A jump in economic growth, for example, could send commodity prices sharply higher.
- The spike in yields on Treasuries on Friday was driven by the view that the Federal Reserve would need to raise interest rates sooner than expected, possibly slowing the economy too fast, too soon.
- The timing of the government stimulus is not done well. Households are riddled with debt and inflation may come on too strong if the economy gets fueled too fast by the stimulus money.
- Wile the rate of contraction is slowing globally, data on employment, retail sales, industrial production, and housing in the United States remain very weak; Europe’s first quarter GDP growth data is dismal; Japan’s economy is still languishing; and even China – which is recovering – has very weak exports, explains Henry Blodget for ClusterStock.
- Unemployment is high and still occurring in the United States and on a global level.
One of the easiest ways to protect yourself in the event that a recovery is hindered is to have a strategy. We watch the 200-day moving average to determine when we’re in and when we’re out of the markets.
For more stories on using ETFs, visit our education page.
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.