Cheer up. The depth of our despair, from an economic standpoint, is scheduled to take place on or about October of this year.
The balance of the summer will be rough with lots of bad news on the economic front, but behind the obfuscating veil created by the news media, things are already looking better. How do I know this? Because I spend most of what I earn from writing this column to access monthly information from the Institute for Trend Research - the latter being a think tank of economists located in a backwater of New Hampshire. Headed by twin brothers, Alan and Brian Beaulieu, the institute publishes charts and graphs and distills them into a computerized brew that has been remarkably accurate at predicting future economic events over many years.
In a recent speech in San Francisco, Alan Beaulieu pointed out that we were approaching the economy's nadir, as the financial services sector, the first of several leading indicators, was starting to show signs of a turnaround. It doesn't take a genius to recognize that the stock market is making a comeback, and the bond markets are firming up as well. Traditionally, financial markets lead the economy by about six months - and small companies lead the overall market by an additional three months. Both are right on schedule to predict an October turnaround.
The second of eight major benchmarks is housing, and that market appears to have hit some version of a bottom. For every homeowner sadly walking away from a foreclosure, there is someone else now ecstatic at being able to find an affordable home.
Retail sales are still falling and have yet to hit bottom, as is also true with the level of new orders and production of goods. This is why October is the still the earliest we can safely say that the economy will have entered its recovery stage. Retail sales need to start an upward trajectory before we have any serious resurgence, and this category generally lags the housing and financial indicators by several months. Prices will continue to fall for several more months, and then start rising sometime in mid-2010. The consensus is that the real force of the recovery will be felt in 2010, but the seeds will be planted as early as October of this year. We might as well start crossing off the days on our calendar.
Meanwhile, the trend research indicates that the stock market, for example, will not achieve its 2007 high water mark until as late as 2020. That's not to say that retirement savers won't make money between now and then. There will be dividends reinvested during the next 10 years and there will be market declines offering opportunities to dollar cost average. The latter reduce the average price of all shares by buying at least some on a regular basis while the market implodes. Anyone curious about inflation might be interested to know that it will be 1.5 percent in 2009; 3-4 percent in 2010; and 8 percent in 2011.
And that's not all. So far, only $125 billion of the $480 billion earmarked for the stimulus has been spent. The balance when disbursed will further strengthen 2010's economy. About the time the rest of the stimulus is paid out, the banks will be paying back the money we lent them. Is this a great country or what?