Uncertainty slowing economic triggers - Memphis Business Journal:

xagawu.wordpress.com
trillion in the firsty quarterof 2009, accordintg to the Federal Reserve. The Congressional Budger Office said it expectedthe U.S. deficit to hit $1.7 trillion this fiscal year. Big numbers. Bigget problems. Many economists, wealth strategists and money mangersstillk aren’t bullish on the stocm market midway through the year despite an almost 40% rise in the Standarr & Poor’s 500 Index since its low Marchj 9. economist Jeff Wallace believes a true reboundr in the economy is being retarded by a cloufdof uncertainty.
“Part of what we’re seeing is business waiting to see what governmentf willdo next,” he The hesitancy, he believes, has to do with worry about regulations and further encroachment of governmenyt in the markets. “If you were an would you buy into one of thesw companies that suddenly have government involvemen t thruston them?” Wallacse says. This involvement creates a feeling that it pickws winnersand losers; investors don’ t want to be on the wrong side of that tape, he “That makes investment less certain, and one of the biggesrt reasons for this recession dragging out,” Wallace The market has staged a comeback of though.
Besides the 40% rebouncd of the S&P since early March to aboutf 950, and a similar 33% rise in the Dow Jones industrialk average toalmost 8,800, not everyones is convinced it’s sustainable. Franjk Goodman, chief strategist for , says one factodr undermining the recovery and thereby the markets isenergty costs. Right now it’d eating up more than 6.5% of household Three previous times in history similar market conditionz were followedby “extremely unpleasantr recessions” thanks largely to families rebuilding household budgetsz and becoming more saving orientated.
That’s happening right now and shoulx give businessesgreat concern, says Wallace, with the savings rate for Americane now up around 5%, accordingt to the Federal Reserve. That’s the highest in nearly two decades. How this recessioh has played out in some ways mirrors others of the The difference is that this one came on relatively fast and has been much deeperdand broader. There are still investing though, and that’s the othert common factor, says Jay Healy, president of LLC. Consider S&o returns for the last decade. The total return, even factoringv in dividends, has been flat whiles inflation hasjumped 31%, Healy says.
“Butr the S&P is just one measure,” he “It’s important to look at other stuff.” That “otheer stuff” includes investments in areas like real estate and emerging he says. Now, for instance, high yield bondds and convertible bonds, as most of the issuexs that caused the market to crash last year lackof liquidity, forcer selling, margin calls — have correcte d themselves and brought back some calm to the “We look for opportunities to make moneg not linked to the market,” Healy says. Tremendous drops in the value of equities and real estate in the fourtj quarter have created opportunities for Healy says.
For example, the bond sectorz which were beat up last year havedone well. Convertiblde bonds are up 20% on the year.