While just a month ago the street spoke of recession, today it's not so sure. Retail sales, including autos, were relatively strong in January. Housing starts were vigorous, and mortgage refinancings are brisk. High profile layoffs still make the news, but the labor market still is tight and dislocations seem temporary. The biggest concern should be with the state of the consumer.
Polls show that most people feel pretty well off today, but are worried about six months from now.
As business spending slows, it is a natural response for consumers to be cautious. But it will be important to watch what the consumer does rather than focus on what he or she says. Obviously, this seems to be the focus of the Fed and their efforts to inject liquidity into the system. We may hope that the effect of these aerobic exercises is a plus. Anyone who has invested through the recent past has developed a stronger stomach, if not heart.