Stock Market Outlook
Every week our market analysis team discusses timely market insights.
January 6, 2009 (Weekly Update)
11:00 A.M. ET
DJIA 8,973.20
Al Goldman, Wachovia Securities Chief Market Strategist
Revive and Prosper
The stock market always does its best to befuddle the majority. The year 2008 was the worst in market history since the Great Depression, and then the new year started with the best rally since 2003. Yes, this action got folks' attention, but what does it really mean? Is everything now coming up roses and all is well? No, but FDR said it best in his inauguration speech in 1933. Most remembered is his statement that "The only thing we have to fear is fear itself." Certainly sound advice for most areas of our life. Before that statement, however, he said "This great nation will endure as it has endured, will revive and will prosper." Now that fits perfectly into today's economy and stock market. Many have lost confidence in America because of the horrible stock and credit market problems of 2008, but we believe that fear is overdone. Is America perfect? Of course not. Are we finished as a great nation? Of course not.
America remains the largest economy in the world with a $14 trillion GDP. That's three times greater than Japan, which ranks second. Size is one thing, but confidence in a country is even more important. While the world faces a recession, investors around the globe have been aggressively buying U.S. Treasury bills. This is not because foreigners love us. It is because they are very confident our government will pay its obligations. Yes, our economy will probably get worse before it gets better, but so will almost all nations. As President Roosevelt said, we "will revive and will prosper." Although our economy ended the year very weak, there has been some positive economic data. Orders for durable goods other than transportation equipment rose in November. Also, the big energy price decline is having a positive effect on consumer income.
Fed Chairman Bernanke has stated that the Federal Reserve will do whatever is necessary to revive the economy. Combined with a large stimulus package early this year, it is realistic to believe the economy will be doing better by the second half of 2009. Of course, this could be wishful thinking as there is no solid evidence that the economy will turn back up this year. However, there is solid evidence being given by the action of the stock market. For the past six weeks, the global economic news has been awful: the situation in Gaza has gotten much more serious, China's economy appears to be dropping sharply and our nation's credit markets have shown little improvement. Despite all of these negatives, the stock market has been able to achieve a solid rally. We believe the good market action reflects the fact that most Americans believe what an eastern Monarch was told many centuries ago when he charged his wise men to come up with what would be true for all time: "This too shall pass." Short term, the stock market may over-celebrate how quickly a President Obama and the Congress can turn the economy around. Long term, Obama has the opportunity to achieve some great things for our nation.
Mr. Goldman has been quoted in many national media outlets including radio, television and print. He has been interviewed frequently on various radio programs (CBS, ABC, WSJ Radio News Network and National Public Radio) and quoted in The Wall Street Journal, New York Times, USA Today, Investor's Business Daily, Associated Press and Bloomberg Business News. In addition to several appearances on ABC's "World News Tonight," he has appeared on CNBC, CNN, Fox News Channel, Bloomberg TV and PBS' "Nightly Business Report." He has also appeared several times as a special guest on the former PBS program, "Louis Rukeyser's Wall Street." He is a member of the St. Louis Society of Security Analysts and the Market Technicians Association.
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