Since the slide in equity prices that began July 22nd, US stocks have lost some $2.8 trillion dollars in value and roughly $4 trillion worldwide. Following yesterday’s rally, the MSCI Total US Market Index is down 13.5% and the blue chip Down Jones index is down 12.1%. Investors slugged it out this week as news gyrated on earnings, interest rates from the Fed, jobs data, and European bond woes. The Dow experienced an unprecedented four-day ride points-wise; down 634, up 429, down 519, and up 423. 

The US economy continues to blaze new paths to recovery. The week’s economic reports demonstrate how the world’s largest economy can grow even in the face of enduring impediments. With unemployment near 10%, housing prices in decline for the first time in recent memory, and confidence near all-time lows, the consumer is showing signs of life. The manufacturing and non-manufacturing sectors of the economy are coming back with improving signs of strength. Recovery is young and weak, but difficult to deny.

With each passing day more of the dark corners of uncertainty are illuminated. A few goblins lay in wait to surprise us in the coming weeks (like pension funds and corporate real estate), but most have reared their ugly heads by now. The world’s financial system is slowly and systematically being purged of its ills, though recovery will be a long and painful process.

Remember climbing a ladder for the first time and hearing the advice – don’t look down? Seems everybody looked down a couple of months ago and believed the worst. People seem to be frozen like deer in the headlights. In my conversations with friends and clients I hear that their businesses, some related to homebuilding and others completely unrelated, simply fell off the cliff a couple of months ago. While some can be explained by high fuel prices, poor exchange rates, and tight credit policies, the reasons are broader than the economic data. There seemed to be a psychological line that was crossed and people simply put on the brakes.