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  • Why the Economic Recovery Isn’t Stronger

    We are told that the recession ended in the 1Q of 2009, but for most of us it sure doesn't feel like it ended at all. The official unemployment rate is still near 9% (near 16% if you count everyone), and the economy is struggling just to eek-out 3% GDP growth. In the past, the economy soared by 5-6% GDP or even better following severe recessions. So why isn't this economic recovery stronger?

    As I will discuss today, consumer confidence took a surprise dive in March. The latest figures on the housing market were simply dreadful across the board. Bank lending remains in the tank. And private investment in the US, especially by foreigners, has fallen off a cliff as a result of the recession and the falling US dollar. These are all reasons why the recovery is so sluggish, and they are not likely to change soon.

    The US equity markets have been on tear to the upside, despite the disappointing news on the economy. It seems that virtually everyone is convinced that stocks can only go higher, but that's usually a sign to look out below. Whatever happens, this is a very uncertain time in the markets!