An Inconclusive Week

This week's piece will only offer a brief look at the markets.
	Stocks and currencies generally moved in trading ranges this past week with investors and traders appearing to grasp for any piece of news that might support a bullish posture. Stocks finished the week a bit lower, with the S&P 500 doing somewhat better than the Dow. A major sell-off in both indices on Monday was offset by a rally Thursday. On Friday, the markets were down on news that the US savings rate had climbed to a 15-year high. The Dollar was generally lower against most other major currencies in lackluster trading, although it finished the week unchanged vs. the British Pound. In stocks, any news that reflected the current uncertainty regarding the health of the global recovery was met with selling. On Monday, news that the World Bank had lowered its forecast for global growth in 2009 caused widespread selling. However, on Thursday, stocks rallied after the Fed indicated, at the conclusion of its two-day FOMC meeting Wednesday, that it would keep rates low for an indefinite period because of continuing signs of economic weakness. In our opinion, investors seem to be clinging to "green shoots" optimism rather than basing their decisions on a solid grounding of analysis. So far, there has been little evidence of a recovery; rather, all we have seen are numbers that show the economy is not falling quite as fast. Investors continue to believe that, based on talk from the Obama Administration regarding the effects of its stimulus and on the extent of the quantitative easing from the Fed, we will soon be back to the "happy " conditions that existed in 2007. We think investors will be disappointed - and soon. As we have pointed out several times in the past few weeks, we believe the recovery will be slow and drawn out. What's more, the rate of growth that is ultimately reached will be well below what the economy experienced in the years before the recession began. The saving rate, reported Friday, is one indication of that. Before the crisis, consumers borrowed heavily on their home equity and their credit cards. Now they are paying down that debt and may never revert to their old spending habits. We think that he markets are beginning to reflect this realization and that the next major move could be downwards.