Although the market and exchange traded funds (ETFs) have rallied off the March 9 lows, and handsomely at that, there are still those who refuse to buy it. If you’re on the fence, here are some reasons why things are looking up.
Pundits have said the economy is recovering, despite lingering issues. There are some key fundamentals that need to be fixed before we can call the economy “fully recovered” – job market and consumer spending, anyone?
At the least, one could say the economic momentum has shifted even if the changes aren’t yet evident on Main Street. Sarah Morgan of SmartMoney has seven other recent findings about why the economy is on an uptrend, and we’ve thrown in a few bonus ones, too:
- Ben Bernanke: “The prospects for a return to growth in the near-term appear good,” the Fed Chairman says. But the return to growth will be sluggish.
- Inflation is at still at bay. The Bureau of Labor Statistics said that the Consumer Price Index rose just 0.4% in August – and it has slipped 1.5% over the past year. This is good news for workers who have lost their jobs. It also bodes well for interest rates being kept low for the time being.
- Deals are up: Several billion-dollar deals have gone down, meaning larger corporations are doing better.
- GM is back in production. General Motors’ Vice Chairman Bob Lutz said last week that the company may need to increase production of four of its most popular new models to keep up with demand. This is good for factories and the job market.
- Industrial production is up: Companies cut inventory at a fast pace this year, but the second half of the year and into next year should see a reversal of this trend.
- Regions are reporting growth: Production and new orders indexes were both in positive territory for the first time in a year.
- A positive outlook for consumers: The healthier consumers who see bargains and start shopping will pick up where the government stimulus leaves off, sparking sustainable growth. Other consumers will begin to repair their balance sheets and begin to spend again.
- Earnings season: It started last week, and Alcoa (NYSE: AA) was the first Dow component to announce its earnings, and it was a surprise profit.
- Retail sales: Retail sales rose 0.6% in September. Although they’re still at 2005 levels, this is a positive sign that things are moving in the right direction.
- Jobs: The number of newly laid-off workers filing for unemployment last week dropped to the lowest number since the start of this year. It’s the fourth drop in new claims in five weeks, and is being taken as a sign that some healing in the job market is still taking place.
The longer investors sit out this rally, the more they’ll miss. Instead, have a strategy for entry and exit in order to protect yourself. We use the 200-day moving average. For more information about trend following and implementing a strategy, check out The ETF Trend Following Playbook.
For more stories about trend following, visit our trend following category.
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.