28 Mar 2002 What Recession?

Today, economists are declaring the recession is over.  In fact, it was likely over before it was officially announced last fall.  This morning, the government released its data on fourth quarter Gross Domestic Product that showed the economy grew at a 1.7% rate. This strong increase suggests that the first quarter of this year may be the strongest in two years.  Increased spending on the part of the government and the consumer likely fueled growth as strong as 4.2% say the experts.  And that spending is likely to continue as the University of Michigan Confidence indicator rose to a 15-month high of 95.7 in March from a 90.7 in February.  Bloomberg reports that consumer spending grew at a 6.1% annual rate in the fourth quarter, the fastest pace since the second quarter in 1998. 

While some are calling it the recession that wasn’t, these folks likely haven’t talked to the executives, employees, and shareholders of the high tech or telecom industries.  Many of the companies representing these sectors continue in deep recession.  But many are seeing some signs of improvement.

The only caution signs this week came from the durable goods orders and a slight up-tick in initial jobless claims.  The four-week average provides a less volatile measure and is still in good shape.  Many of the green indicators were quite good demonstrating a strong-than-expected recovery.

The market will likely be a bit less trusting than in previous recoveries.   Because this has been a business recession, much of the Fed and government stimulus has not been effective in curbing it.  Investors will wait longer to see actual earnings recoveries in companies and be less anticipative.  Volatility, while dramatically lower than September of last year and January and February of this year, will remain a function of the markets for months to come.  For this reason we are increasing the number of companies held in each of the models portfolios, which explains the increase in confirms over the past couple of weeks.

The markets and our offices will be closed on Friday in observance of Good Friday.  We wish you and yours a Happy Easter and look forward to seeing you again next week.