Is Our Past Part of Our Future?

If the past is evidence for our future then look for the economy to gain some traction in this new year. The Dow was up .84% in the first week of trading for 2011. Historically (The January Effect) the Dow has risen on the year 74% of the time that the first week was positive.

Many economists believe that by the summer months hiring will be happening at a more measurable pace. Fueling that optimism is the health of US businesses. Profits have recovered significantly (notice GM, Bank of America, Wells Fargo and AIG have all repaid their loans). They have all been able to slash their respective debt while borrowing money at very low rates. There is little question as to their ability to expand; The only question is WHEN? Again if history is a guide then an expansion should happen over the coming months. Throughout past recoveries, profits needed 6 to 12 months before growth picked up. In essence you can only boost profits by slashing costs for so long. The ability to sustaining strong earnings growth and support the elevated stock prices comes from seeking new revenue sources (i.e. more investment and more hiring).

The largest hurdle to this improved outlook is our own governments fiscal imbalance. We need a credible fiscal plan. Not monetary…

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