Tuesday, October 5, 2010

Double Dip? Not Likely -- Brace Yourself for Growth

A "double-dip" recession is not only unlikely, it's the oppoosite of what's probable -- several quarters of continuing, though not exciting economic growth.  Something we try to do at Chief Executive Boards International is provide perspective across the many business sectors represented by our members.  I recently heard a most interesting and provocative perspective on the US economy presented by Bob Doll, Vice Chairman & Chief Equity Strategist for Fundamental Equities for BlackRock.  Here are some of the things Bob had to say that suggest those waiting to invest in either their businesses or equities may want to reconsider:   
  • Business owners, almost universally, say things are "less bad" than they were 6 months ago (consistent with our members' input) 
  • You would think employment was down in 2010 - actually, according to the Bureau of Labor Statistics (BLS), private-sector employment has risen by 763,000 (temporary census workers are not part of that data)
  • We've had 5 consecutive quarters of GDP growth since 2Q 2009
  • The media talks of a "Jobless Recovery".  Actually, all recoveries start out jobless.  At about 2.5% GDP growth, companies start re-hiring (we're not there yet)
  • Part of our protracted slow growth is consumers de-levering -- paying down debt.  This results in about a 1% GDP drag -- overall a good thing, but slows the pace of recovery
  • Growth is likely to continue and slowly accelerate, unless the economy is hit by a 2x4 -- such as a sharp decrease in money supply, raising interest rates quickly.  There's little indication of that intent on the part of the Fed. 
  • The US Stock market is less US-dependent than you think -- 40% of US S&P 500 revenue is from International operations
  • Only 15% of US S&P 500 revenue is from US Consumers
  • We had one month of "less bad" news from the financial media (September) - stocks ran up 10%, indicating that people have been very defensively positioned (waiting to return to stocks)
 So, overall, Bob Doll is in the same camp with Brian Wesbury, author of It's Not as Bad as You Think.  While the media continues to be negative about the economy might be a good time to make your move if you agree Bob and Brian. 

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Terry Weaver

Chief Executive Boards International


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