Friends
Let’s talk about the economy for a moment before we touch on politics. As we discussed earlier, the GDP number for the 2nd quarter was very anemic. What was even worse was the revision downward of the 1st quarter GDP number. I know it is backward looking, but the fact is the economy is just barely growing at all. It seems likely that July hasn’t exactly blown the doors off either, as most of the month has been waiting for Congress to come up with a debt deal. Now of course, we know the reasons for the first half of the year malaise: rising gasoline and commodity prices, the Japan crises, political uncertainty etc., but the fact is we will never create jobs and grow confidence if we don’t get some economic growth generated. As one analyst commented this morning, the economy could use a hug. The debt ceiling crisis is amazing theater, but eventually we will be focusing back on the economy, and today’s reports are just not very encouraging. Perhaps, once this political nonsense is behind us, we can begin to rebuild some confidence in the U. S. and companies will feel good enough to begin to hire folks.
Back to the politics. Both sides will likely wrangle all weekend, but I see this thing going down to the last minute. Again, ironically, U.S. debt is likely what is going to be downgraded but it has not stopped a flight to treasuries. The 10-year note was at 2.85% today after being over 3% on Monday. Remember, rates fall as prices rise. Doesn’t seem like the likely downgrade is scaring anyone off. As we said earlier, where else are investors and savers going to go?
Stocks ended the day down 96 points on the Dow Jones Industrial Average. For the week the Dow fell over 500 points. The S&P 500 closed at 1292, which broke the 1300 support level but stayed above 1284, which is the 200 day moving average. Stocks are at the mercy of politics for the moment. We will see what happens over the weekend in Washington and check in with you on Monday morning to set up the week.
Have a nice weekend everyone. We most assuredly have a lot to drink about.
