The actual WILDCARD to be used in stock analysis

Barely a day flows by way of that I usually do not find out a conversation or maybe see the article about "the" forthcoming double-dip recession and at present appeared to be virtually no exclusion. The market tanked upon even more bad economic information along with every last self-appointed specialized on the track record of the Depression symptoms alleges that will find striking similarities with current political, economical along with fiscal conditions. Which could be so, although I do not really believe that a double-dip economic collapse is most likely to take place?

Yes, the economy is slowing down and even the Federal Reserve has lowered its forecast of economic growth. Unemployment is still near 10%, the housing market is still weak, retail sales have slipped for two consecutive months and consumer sentiment is sinking fast. But inflation is benign, interest rates are extraordinarily low and corporate earnings are rising. This combination of factors is bullish, very bullish, for stock prices.

Practitioners connected with the double-dip principle can easily speak all these people wish about government debt, decreasing buyer investing, the oil spill, LeBron James or whatsoever. It doesn't generate the economy such as the cost of living, interest rates together with earnings do. Hence the reason why is the economy slowing?

The economy is slowing because small business owners are not spending money and creating jobs as they have done in the past. They are concerned about the political turmoil within the country and uncertain of the future. Those who need the money to grow can't get it. Those who can get the money don't want it. Those who have it won't spend it. The traditional effect low inflation and interest rates have on stimulating the economy will be inhibited until government policies become more business friendly. So where do we go from here?

It might be my contention that irrespective associated with government guidelines, a double-dip recession will not come about as long as inflation stays benign, interest rates remain reduced and corporate revenue keep on to rise. The Fed has frequently said it will keep interest rates low as long as it will take to be able to retain the economy developing. That's great; however, this may certainly not end up being attainable. They can handle curiosity rates, but they cannot handle inflation.

If inflation turns into deflation, the economy will shrink. If inflation takes off, the Fed will be forced into raising interest rates. When that happens, a double-dip recession is a virtual certainty. So it all depends upon what inflation does. It's The Wildcard.

MOVING TO THE SIDELINES

I dislike saying this, but it appears that we all have gotten caught within the jaws of some other Evil Wedge. Just what does this mean and what to do now? Mr. Bryan Barnes, Advisor and Instructor, may express what it all suggests and what to do now. So visit the VectorVest University to view this week's insightful "Strategy of the Week" presentation: "Moving to the Sidelines."

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