Beneath Gloom, Signs of a New Economic Vibrancy
Now, after months of seemingly nonstop bad news, there are hopeful signs on the horizon. Below the surface of gloom, there are signs of a new vibrancy. They include:
• A broad rally in stocks, confirmed last Thursday, continuing into this week and led by the beaten-down financials.
• A surprising 22% surge in February housing starts to a seasonally adjusted annual rate of 583,000 units.
• A back-to-back jump in retail sales ex autos, in both January and February.
• A return to profitability at several major banks, including Citigroup, Bank of America and JPMorgan.
• A doubling in the obscure but important Baltic Dry Index, a key indicator of global trade flows.
• An upwardly sloping yield curve, which Fed research suggests all but ensures a rebound by year-end.
• A Housing Affordability Index that has hit an all-time high.
• A two-month improvement in wholesale used-car prices, measured by the Manheim Index.
• A rise in Monster's Employment Index in February, suggesting a turn in the job market may be around the corner.
• A 4 1/2-year high in the dollar against other major currencies, on a trade-weighted basis.
• A sharp increase in the money supply, as measured by M2 and M1. Weekly M2 growth has averaged 10.1% year-over-year since the start of 2009, while M1 has grown at a 14.6% rate.
• A two-month rally in the Index of Leading Indicators.
• A growing body of evidence that the "liquidity crunch" is dead. Data show nearly $14 trillion in liquidity on the sidelines of the markets, ready to boost consumer spending, credit growth or further stock market gains.