Research Outlook 2007 Economy Stocks International Bonds Market Studies Research team Download Economic Outlook Summary Booklet

Economy

POSITIVES

Falling long term interest rates

Good employment trends

Rebounding consumer confidence
 

NEGATIVES

Weak money growth

Inverted yield curve

Negative savings rate

Consumer is stretched

Housing market quagmire

Government gridlock

James’ economic indicators weak

The 2003 tax cuts have worked their magic and both corporations and individuals have seen profits and wealth increase dramatically.  Profligate government spending and a housing boom have boosted the economy greatly.  Today we benefit from a weak dollar, lower oil prices and falling long term interest rates.

Changes in Congress will make additional stimulus from tax cuts or increased spending unlikely.  Consumers are nearly tapped out because of high debt levels and low savings.     Home prices have started to deflate and declines of more than ten percent nationally are needed to approach fair value. 

Three-fourths of our leading economic indicators are negative.  Fortunately, only two point toward a recession.  The economy will continue to slow and periods of contraction are likely.  The severity of the contraction will depend on the speed and depth of the housing meltdown.   Those who export should outperform those focused on domestic audiences.