Power Capital Consulting

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Economic Outlook


May 5, 2010

The present bull market has pushed the DJ as high as 11,258 on April 26, with some expected pullback since that time.  Support remains at 10,730 with continuation upward prior to descent below that level illustrating continuation of the upward trend.

Discussion of the return of inflation as part of recession recovery has become more apparent recently.  While unemployment and real estate are lagging, consistent with previous post-recession trends, corporate earnings are on the ascent overall, with significant relative growth evident in the time period since the market bottom in March, 2009.

Gold, peaking at 1219.50 on December 3, 2009, has retraced somewhat, now re-approaching previous highs.  Crude Oil continues in a trading range of 64 - 88 during the past 12 months. 

Retail sales are gaining steadily, with overall upward trends in consumer confidence, consumer spending, and producer prices.

This is a unique time in investment history, with opportunities available in various sectors seen on only a handful of occasions during the past 2 - 3 decades.  Market leader growth curves will remain appealing during 2010.  Expect the Fed to gradually raise rates as early as 3 - 4Q, 2010. 

December 10, 2009

While there remains some caution from those who follow the markets, a clear bullish trend has continued as stated below in our previous Outlook narratives.  The DJ will likely remain in the 10,000 - 10,500 trading range for the remainder of the year, before continuing its advance. 

Gold has reached new highs with the decline of the dollar, although this trend will end with forthcoming inflation commencing, in our view, at the earliest in mid to late 2010.  Various other commodities are exhibiting upward movement.

The current Los Angeles Auto Show is devoid of at least 2 previously regular high-end exhibitors, and the crowds are somewhat thin to date.  Absent the government incentives earlier this year, confirmation of continued upward sales trends remains to be seen.

Retail sales this holiday season will  lag pre-recession growth rates, with some optimism beginning to emerge.  The Fed is likely to avoid raising interest rates through 1 - 2Q, 2010, unless clear inflationary signals prompt acute intervention.

Lagging employment and real estate market recovery is consistent with previous recovery patterns, and leaves us with a nevertheless optimistic view of relative economic growth for 2010.

August 10, 2009

As mentioned in early June, the DJIA rose to 9000, retraced and returned in a bullish fashion now approaching 9450 range resistance.  Some retracement is expected at this juncture as low as 8800, however the outlook continues to be a bullish one. 

The Financial community is now openly discussing current conditions as being consistent with the end of the recession.   At this stage, we view the economic outlook as favorable and anticipate continued advancement.

Crude Oil and Gasoline prices continue to waver, with a general upward trend following Crude Oil's bottoming at the 30 spot level several weeks ago.  September Gasoline reached a recent high, retraced, and is now on the increase once again, presently just above $2.  Heating Oil is likely to continue above the $2 range, while Natural Gas remains below the $4 range, based upon nearest futures contracts.

Financial Services industry recovery has been strong during the past several months.  The mindset of TARP fund repayment and recapture of management independence holds high priority among some participants. 

Although the Auto market was soft for 1H, 2009, the Cash For Clunkers program has been very successful, with relative sales increasing at rates not seen since 2007.  Funding endurance remains the chief issue of concern to dealers as well as their buyers.

June 2, 2009

As discussed on April 2 below, the DJIA rose to the 8400 range, hovered there and exhibited what is, in our view, bullish behavior, consistent with the progressive economic recovery currently occurring, by continuing to rise to the 8700 range.  As mentioned, the next resistance is at 9000, where retracement may occur. 

Recollection of previous recessions is accompanied by the understanding of variation in the rate of progress of economic recovery.  Talk of a "soft landing" after a varying periods of bullish activity, as evidence of normal price action driven by profit taking, is an integral part of the process.   

Recent bankruptcy filings by GM and Chrysler are evidence of extremes of economic fluctuation normally seen within the industry accompanied by the dynamics of international competitors' pursuit of alternative approaches.  Necessary transition will now occur in the face of current business conditions with the concurrence of the U.S. government as the majority shareholder.  We will be watching for opportunity here upon bankruptcy emergence.

The financial services industry is also continuing their recovery, with most of the borrowers looking toward repayment of TARP funds in order to restore independent management policies.  JP Morgan, Bank of America, and Citigroup, among others, are benefiting from building investor confidence levels.  Consumers and businesses are awaiting the necessary restoration of funds availability in order to restore the growth curve.

Crude Oil and other commodities are experiencing significant price recovery, as strengthening demand accompanied by the Northern Hemisphere tourist season and continuing growth in Asia occurs.  Retail gasoline prices will continue to ascend at least through the July 4th holiday in the U.S., consistent with seasonal trends.

April 2, 2009

After hitting a 12 year low of 6470 on March 6th, the DJIA has rebounded significantly to a high exceeding the 8000 level today.  Bullish movement is supported by gradually increasing stability of the Banking Industry with the support of the U.S. Government, low interest rates, the G-20 meeting, and a recovery mindset focused upon 2H, 2009. 

On a technical basis, The DJIA has reached a resistance level, with some retracing expected intermittently, and further bullish trend indicated by a breakout above 8400, next resistance at 9000. 

As with previous recessions, employment, housing, and consumer confidence levels, among other indicators, continue to bottom in a cyclic fashion.  The current scenario is consistent with a recovery trend, however, pinpointing market/economy turnaround points is entwined with considerable risk.  For those companies with available cash, the time has arrived, in our view, for aggressive acquisition at currently favorable price levels, where portfolio strategy and future synergistic upside paint a compelling picture.

 

March 10, 2009

As predicted in the article below, the market broke to new lows shortly after February 19, with the DJIA plunging to the 6500 range, retracing to 6800 so far today.

The banking sector has led the decline with Citigroup dipping below $1, and Bank of America in the $3 range.  Other competitors have declined as well, mostly based on the fear of government takeover of the banking system.

Crude Oil prices have bounced back to $47, while Gold has declined to the mid $900 area.

Retail Supermarket and Pharmacy chains are surpassing others in the current climate, as are sectors of the Food and Beverage Industry.

 

February 19, 2009

While the Financial and Automobile Industries are seeking additional government support along with various other sectors, President Obama recently imposed new restrictions on upper management stipends for new entrants.  Numerous international governments have followed the U.S. lead in structuring stimulus packages.

The Banking, Brokerage, and Real Estate sectors remain subdued, without apparent sign of notable recovery.   Occasional upticks in home sales reflect the record number of foreclosures resulting in good values for those able to secure financing and willing to buy and hold.  Fed Interest Rate lowering has added to the buyer's market.

Crude Oil price declines in late 4Q and early 1Q have been followed by intermittent recovery, reflected by prices at the gas pump.  Inventory decline drove prices higher today.  The wide spread between the nearby and longer term contracts continues, suggesting bottoming behavior.

The U.S. stock markets today, have broken out of their trading range to the downside, with the Dow Jones closing at a new low under 7500.  This defines, in our view, a possible first leg of another downside move on a technical basis, with fundamentals consistent overall.  Continued bearish movement of the markets over the next few days increases the probability of a sustained downtrend.

While the mindset of the country is hopeful following the recent U.S. election, and significant efforts are being made by the U.S. government to support and stimulate the economy, visible signs of a sustained recovery remain on the horizon.

 

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