The markets globally are taking their cue from Asia and a weak dollar. China continues to buy commodities and prices have been moving up. The weakness of the dollar, especially with negative comments coming from Russia, is also leading to higher prices for oil, copper, and gold. Commodities tend to be purchased in dollars and as the dollar declines, the commodity prices soar.
The economy doesn't seem to be getting much better and corporate earnings are being driven by cost cutting. As such the markets seem to be driven by higher commodity prices and the hope that the recession is ending. The financial crisis is abating but the risks are still high. However, rising stock prices have been bringing in some of the cash sitting on the sidelines which in turn keeps the bear rally going. Energy shares could lead the stock market higher but until revenues start to grow, we remain cautious.
How will the consumer feel in a few months when gas prices again could approach $4 and mortgage rates are solidly above 5% or even 6%? Unemployment will continue to rise well into 2010 and for those working, income might be declining. Non of these trends bodes well for the consumer and without a strong consumer, how can the economic engine be revived?
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