Is the US Economy out of the Dark Woods – Think Again……

The US economy has improved in the 1st quarter 2012, with stock markets returns being more than stellar. The Dow Jones Industrial Average was up 7%, S&P500 up 11% and NASDAQ leading the way, up 17%. Clearly confidence had improved and ‘risk on’ investing was back. Now it is the economies turn. The challenge of the hypothesis that the economy would follow the lead of the stock market is questionable at best. There were some marked improvement in consumer confidence and spending; manufacturing seems to be coming to life; and most importantly the economy was creating jobs. As much as this picture sounds rosy, the details reflect a somewhat different picture.

Mild improvement did occur in a number of economic indicators but one has to recognize that they were improving from a horrible baseline. A minor bounce was due in the economy given the trillions injected into it by both the Federal government and the Federal Reserve. Federal Reserve Chair Bernanke has pushed up his balance sheet (creation of money into the economy) to about $3 trillion. …Continue Reading