Wall Street has seen 10,000 on the big board a couple of times over the last week which has led many people to believe the economic recovery is here. I am not so sure that it is and here’s why.
By all measuring sticks there is no foundational basis for the stock market to be at 10,000. It’s all based on speculation. Think about it, has the jobs report boosted investor confidence? I think not. The unemployment rates goes up every month and every quarter. Has consumer spending or retail sales fueled the run up in the market? Again that would be a big “NO”. Has foreclosures been on the decrease? No they are on the increase. The only reason I can see that investors have come back into the market is speculation. They believed that the market was as low as it was going to get and they feared they should buy soon to capitalize on a run up in value. So what’s the problem with that? It’s kind of like a house built on cards, not very stable and could collapse at any time. Don’t get me wrong it’s good that people are no longer losing money, their retirement, their life savings and companies are worth something again. I just think its pre mature to say the stock market is up and the recovery is here.
I think the real recovery rests solely on jobs, jobs, and jobs. It’s not going to be enough to slow down unemployment we need to reverse unemployment. People have to stop losing their job and companies need to start hiring again in mass and I am not just talking about the big boys. People need to start small businesses, get loans to start businesses and small business need to expand and hire people. Consumer spending needs to be on the increase for more than one quarter along with consumer confidence. When these things happen the recovery will be here, it will be stable and it will be sustained.
I am not trying to be the kill joy here, but the real reason companies have showed better than predicted quarterly earnings is because they have laid off a lot of people and drastically cut expenses making the bottom line look better than expected. It’s good that Wall Street is making money again, but the real recovery is when the average American is making money again.