This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Consumers, Wisely, Show Some Restraint

NEW YORK ( TheStreet) -- Three consecutive quarters of economic growth. Gradual improvement in the labor market. And while financial markets have been turbulent, economic activity has been only modestly affected. I have been arguing for some time a recovery would take hold this year -- and that clearly is the case, and then some.

Growth is still on pace to be stronger than anticipated, fundamentals have improved and the lift from unprecedented fiscal and monetary policy support has finally kicked in.

So let's celebrate the recovery and be prepared for a second half of mostly good news for the economy and, hopefully, some recovery in equity prices.

The celebration is likely to be a bit subdued, but that could prove to be a positive thing -- especially if the restraint is being driven by consumers.

The pace of the recovery will be affected by a number of factors: the next phase of deleveraging by households; how the Federal Reserve executes an exit strategy; and the playing out of the fiscal debacle in Washington and state capitals.

The primary issue in the near term will be centered on how consumers continue down the path of deleveraging and restoring their personal balance sheets. Millions of households have been turned upside down after a decade of debt accumulation followed by the worst downturn in seven decades.

Now consumers are figuring out how to pay down debt and get back on solid ground. In terms of consumer deleveraging, we should not kid ourselves about the magnitude of the change required.

Debt is still more than 61% of gross domestic product, net worth is still down 17% from its peak and savings rates required to support future obligations need to more than double from current levels. This is before we adjust for the massive underfunding occurring in Washington and state capitals -- underfunding that will eventually have to be addressed.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 -1.15%
FB $117.58 0.73%
GOOG $693.01 0.29%
TSLA $240.76 -2.81%
YHOO $36.60 0.03%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs