Robert W. Baird & Co. Inc. chief investment strategist Bruce Bittles says the stock market’s ongoing surge reflects an economic recovery in the making.
"The results of the Federal Reserve meeting held in late September indicate that Fed members feel the economy has turned the corner and should experience positive growth in the second half of the year and into 2010. The latest economic data, including better-than-expected retail sales, an uptick in small business confidence and improving weekly jobless claims confirm that the U.S. economy is on the mend," Bittles said in an advisory note Monday. "Inflation is non-threatening with last week’s CPI (consumer price index) report showing pricing pressures down year-over-year. The CPI has fallen seven months in a row. Despite the government printing presses running overtime, we anticipate there is sufficient slack in the economy to prevent inflation from gaining a foothold until late 2010 or 2011. The performance in the government bond market, with the yield on the benchmark 10-year Treasury locked in a very narrow range of 3.25 to 3.75 percent also suggests pricing pressures are very low and likely to remain soft. Reports on the housing industry will dominate this week’s economic reports. Housing starts, building permits and sales of existing homes in August are expected to show housing has stabilized and could begin a recovery phase. Improvement in the home building industry could be an important factor in new job creation, which could show up in the employment data in the months just ahead."