By Kevin Grewal, editorial director at www.SmartStops.net
NEW YORK (
) -- Do the recent optimistic trends signify the worst economic recession seen since the 1930's may be coming to an end?
There are plenty of economic indicators to suggest that is the case. From a macroeconomic perspective, U.S. GDP declined at an annual rate of 1% in the second quarter beating the 1.5% annualized contraction economists had anticipated.
As for the markets, all major U.S. indices have rallied with equities posting their best July performance in the last 70 years, pushing the
Dow Jones Industrial Average
north of 9,200, the
above 1,000 and the tech-heavy
The second quarter was healthy for corporate America. According to the
Wall Street Journal
, 74% of publicly traded companies that reported earnings through July 31 beat Wall Street's expectations. Additionally, unemployment numbers are beginning to ease as the Labor Department announced that the national jobless rate declined from 9.5% to 9.4% as companies handed out 247,000 pink slips in July.
There was also a 0.4% increase in consumer spending in June, despite a decline in personal incomes of 1.3% over the same period. Lastly, there was a jump in pending home sales, which extended out a rally of increases to three months in a row for the first time in the past five years.
Those who believe that tough times are still ahead are preaching that corporate America beat Wall Street's expectations through cost-cutting measures and not increases in revenues, same-store sales of big retail chains have been declining, overseas markets, which are a reason for the most recent uptrend, could potentially be in a bubble and unemployment benefits are declining because people are running out of them.
In a nutshell, the answer to the question of whether or not the recession is over, can only be answered by time. However, it does appear that situation is starting to get better and history has proven that the stock market rebounds before the overall economy. This notion can be further supported through the performance of the following equities:
DIAMONDS Trust Series 1
, closed at $92.63 on Thursday, up 42% since a March low of $65.44.
rebounding nicely from a March close of $68.11 to close at $99.89 on Thursday, an increase of 47%.
( QQQQ) closed at $39.38 on Thursday, up 53% from a March low of $25.74.
SPDR S&P Retail
closed at $31.16 on Thursday, a 71% increase from its low of $18.27 in March.
One must keep in mind that only time will tell us if this recession is over and for this reason risks are involved when investing in equities. To help mitigate these risks, an exit strategy is helpful. According to the most recent data at www.SmartStops.net, the price levels where an upward trend in the aforementioned equities would be in trouble are at the following: DIA at $89.04; SPY at $95.71; QQQQ at $38.08; XRT at $28.68. These price levels change as the markets fluctuate and updated data can be seen at www.SmartStops.net.
-- Written by Kevin Grewal in Laguna Niguel, Calif.