The Economy and Bond Market
Consumer confidence took a dive this month, highlighting the fragile nature of the economic recovery. Most of the economic news out this week from consumer confidence, to housing and concerns regarding European stability had a negative bias to it.
Strengths
- Fed Chairman Bernanke reiterated his view that record low interest rates would be maintained for some time while the economy recovers from the recession.
- Fourth-quarter GDP, fueled by business spending, was revised higher to 5.9 percent from 5.7 percent.
- The Congressional Budget Office (CBO) estimated the emergency fiscal stimulus created more than 2 million jobs and boosted the economy more than many had expected.
Weaknesses
- New home sales hit a new record low, falling to just 309,000 annualized units.
- Existing home sales were also weak, falling 7.2 percent in January.
- Weekly initial jobless claims rose to 496,000 and hit the highest level in three months. This is a sign the economic recovery remains uneven.
Opportunities
- If financial markets are a good mechanism for discounting the future, the future appears relatively robust. The markets have been able to shake off bad news relatively easily this week, probably a good sign for the economic recovery.
Threats
- If one of the eurozone countries were to seriously threaten default, the whole eurozone system comes into question and threatens global financial stability.
