Reports out of Wall Street continue to be mixed. The index of leading indicators points to economic growth, but earnings from Microsoft, 3M and American Express today show a different story. Consumers continue to struggle to find credit and companies are trying to find their own ways to extend credit to their customers to stimulate demand for their products and services.
In the housing market, home re-sales are higher due to lower prices. It looks like the supply and demand for existing homes is finally finding the equilibrium point. The Dow closed above 9,000 for the first time since January 2009, indicating that market players anticipate a recovery regardless of current earnings.
Asian markets continue to show signs of recovery and economic growth with South Korea posting its best quarter since 2003! along with semiconductors and automotive industries showing great results coming from South Korea, China, and India. European markets are up with Credit Suisse announcing profits that are 29% higher this quarter showing a strong financial institution.
What does it all mean? Is it time to put money into equities? And if so, in which markets? US markets, European markets, Asian markets or other? Which industries in these markets are more likely to benefit from a global economic recovery and why? What does it all mean for the business environment here in the United States where we are facing unemployment of over 9%?
In my opinion, US companies should concentrate on sales to governments around the globe and Asian emerging markets. They should follow government spending and industries that are likely to benefit from government spending around the world. Investors should diversify investments they pursue in emerging markets since these markets are, in the lung run, dependent on US spending on foreign goods and services. When it comes to investing in US markets; again, I would pursue industries that are likely to benefit from government spending; more specifically, infrastructure. I would not pick individual companies, but rather diversify using index funds that include several players that will likely benefit from spending in infrastructure. I still believe unemployment will remain high even if we experience a recovery in the second half of 2009 since the unemployed are likely to experience structural unemployment as new industry opportunities emerge out of this recession. Many will need retraining and relocation before they can once again become productive members in our society.
Tell me your thoughts, feel free to disagree and propose a hypothesis of your own. Feel free to use news and other research sources to formulate your answer. Have fun!
