The Hot Corner...

March 9, 2010

What A Difference A Year Makes?

A year ago this week, the stock market cratered to levels not seen since September 1996. The investing climate was the most pessimistic since the Great Depression (at least that's what we are told). Pretty much every major financial institution was on the brink of folding and would have folded without the rescue efforts of good ole Uncle Sammy! Essentially, the world was about to end (A little dramatic, but necessary)!

Fast foward a year and look at where we are today. The stock market has risen over 65% erasing much of the lost value reached a year ago. The stock price of many financial institutions is back to or even above their all time highs where they once traded prior to last March. Per the stock market, the world is definitely headed in the right direction.

The key phrase is, "per the stock market." You see, the stock market is a leading indicator of our financial world and one that typically acts much like an extremist. It measures where investors believe the economy is headed not where it's been. So, if investors are right, maybe the worst is behind us and there are nothing but clear skies ahead.

Exiting Wall Street and entering Main Street, it is easy to pick up mixed signals. The subtle optimisim of investors is not omnipresent in the "real world." Banks are not loaning much money, small businesses (believed to be the engine of our economy by many) are not fairing that well, and unemployment still sits at a staggering 10%. Definitely a different picture than that being painted by Wall Street.

So, the question is warranted - Is there really a difference today than a year ago? Is the economy improving? Time will only tell. As long term investors, we can and will weather the storm and more than happily take advantage of the pending future stock market rise - Sooner or Later!