The Week in Review: 08.17.09 – 08.21.09
There was an impressive boost in the markets last week, with the Dow Jones up 181 points, or 2%, over the course of the week. Many investors seem to be willing to reintroduce risk to their portfolios, moving away from money market fund investments in search of higher returns. Despite the good news, the lack of any movement in raising rates from the Fed comes as no surprise as they are cautious in instigating any sort of decline.
As stocks lead the general economy, we expect other economic indicators to pick up in kind in the coming months. An area of concern is “long-tailed” businesses. Developers of commercial real estate, for example, must plan their projects months or years before they are to be completed. If one of these companies planned a project in 2007, it may be just now nearing completion. Since the company likely would not have made any plans in mid-2008, there is nothing “on deck” to begin this year or next. This may lead to a lag in such businesses during the rest of the economy’s recovery. However, such businesses will begin planning new projects along with others, though there may be some delay in their coming to fruition.
The market appears fairly valued. We do not anticipate the market will continue to rise at the same pace. However, it is not out of the question that the market will move higher.