Cautiously Optimistic

I always tell my partners to be sure and read what our clients are reading and that includes publications such as Money, Smart Money and Kiplinger’s. Although I occasionally do complain about their coverage, for the most part, I find that the content is substantive and the reporters very professional. I also frequently find tid-bits that help me when I’m discussing investment issues with my clients. As an example, we’ve been telling our clients that although we are certainly aware of all of the bad economic news we remain cautiously optimistic that the recovery will be slow and bumpy but we won’t experience a double dip recession (naturally we reiterate that “not expecting” is not a guarantee that it won’t happen). The recent (September 2010) issue of Money did a great job addressing these issues and provided a variety of data items that we use in discussions with our clients. For example:

Why cautiously optimistic?

Earnings growth has been good:

  2010 Historical Median
S&P 500 earnings growth first year of recovery 36.4% 6.7%

 
Past recoveries over the last 60 years also hit “soft patches”:

  Peak Trough Peak Trough
Factory activity index 60.4 56.2 64.7 49.9

Corporate cash stash: Q1 2010 – $1.14 trillion

Other professional crystal ball: 66% of money managers expect U.S. stocks to rise in the year ahead

Data from Money magazine, September 2010 issue, pages 49, 50 and 120.

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