Folks, this stock market rally is for real. We keep hurdling over each bump in the road. I foresee a 10,000 Dow within a year. Let's go through the big items affecting the markets and economy one at a time:
We have seen the worst of the effects of the subprime mortgages. Record number of people have refinanced at historically low rates. People are looking at homes at an accelerated pace.
The US consumer is not dead, they have taken a break to pay off debt. Go to any Costco or WalMart store, busy all the time, big ticket totals. This is huge for recovery. The consumer is getting more confident all the time.
This too will come back. The Chrysler bankruptcy proceedings will pave the way for the US auto companies to become truly competitive with other auto manufacturers.
Lending freeze up:
Lending is freeing up, more and more, this will help bring back some investment and growth and in turn hiring of the unemployed.
The first time jobless claims are reversing. This is the real catalyst that will bring the recession to an end.
It appears with the unemployment and slack demand, inflation appears to be in check. Also, energies and other commodities will be low for a while until consumer demand for goods increases. If we have a relatively stable recovery with 2-3% growth, the inflation fears will be controlled.
These all point to better sales, profits, along with low inflation. A combination that will be great for stocks. If the US government will slow some of this spending, then I see a 10,000 Dow in less than a year. Happy investing all.