Global Outlook

New Norms?

Contributed by eResearch

The market wants to go up. After making a six-months low at the very beginning of June, the major Indexes rallied over the summer months, and look poised to test all-time highs. In fact, the Nasdaq Composite IS at an alltime high!

Much has been written lately about the tepid recovery in the U.S. economy, with unemployment stubbornly remaining at unacceptable levels that exceed 8%. Maybe 7% - 8% unemployment is the new norm.

Over the last 50 years or so, it has been the consumer that has been the driving force for GDP growth, accounting for around 70% of economic output. Economists are waiting for the U.S. consumer to start spending again, to spur GDP growth back to the 3% - 4% level. Maybe 1% - 2% is the new norm.

The advent of the personal computer in the early 1980s began to exhibit its unbounded potential in the late 1980s - early 1990s. Pundits forecast that the technological revolution that gained increasing traction throughout the 1990s would increase work-place efficiencies and substantially improve productivity. That it did. In fact, one machine can now do the work of ten (or more) humans. Is it any wonder that our society has transformed from having a focus on manufacturing to one of providing services? New norm?

Debt is at very high levels, both government and consumer, but not so much corporations, which are flush with cash and reluctant spenders. New norm?

Against this backdrop, markets are going up. Maybe we should contemplate a pull-back after the summer rally, but it does not look that way.