Wednesday, March 31, 2010

An End to Our Long Winter?

Recently Diane Swonk, Economist and Federal Reserve Board advisor, highlighted seven factors which indicate our recession is coming to an end. She is quick to note that the gains are not definite; stating “whether those gains can be sustained long enough to bring down unemployment remains an unknown” and characterized any potential recovery as “rocky”. Nevertheless, her points can be taken as a glimmer of hope.

Here are the points as she outlined them:
  1. The pace of layoffs is abating, instead of accelerating.
  2. Production is on the rise, albeit from anemic levels.
  3. Home sales are surprisingly on the upside.
  4. Profits are surprisingly on the upside.
  5. Financial markets are rallying, to some extent.
  6. Core consumer spending, driven by pent-up demand, appears to be regaining some momentum.
  7. Factory orders could be picking up from rock-bottom levels.
A common thread in many of these is the sign of some gain from heavily recessed conditions. None of these marks a return to levels we would hope to consider “normal” but they do represent small, perhaps significant, changes. Taken together they lend credence to the notion that the bottom of the crisis has been felt and we are now on the road to recovery, albeit “rocky” recovery.

Ms. Swonk also mentions that “Consumers are going to have to remain more defensive than offensive in 2010”. But what about investors? If these signs really point to recovery, this could be one of the last chances to invest in a recessed market. Net lease assets have fared better than most commercial real estate and continue to be a safe bet for the future. Financing still remains tough but for those with the resources, getting a net lease asset before the market enters full recovery could be a good move.

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