The DJIA starts the week at 12,269.38. There are plenty of forecasters who believe it will reach 11,000 long before its makes it back to 14,000. The index is down 7% in less than two months. The so-called headwinds against stocks number at least three. The most obvious is trouble in Europe. The recession there will not only hurt the demand for goods and services from US companies; there could be bank balance sheet fallout for some American financial firms, if Greece defaults. China’s economy has also hit a snag, and that is another region where demand for US products will likely falter.
Last, key data about the US economy has been relatively poor. The number of jobs added per month has dropped well below the 200,000 pace set earlier this year. Housing starts have improved somewhat, but home prices have not. If there will be any stimulus added to the economy by the federal government, it will not be until after the election–which means next year. And, both individuals and companies are uncertain about what their tax status will be. Congress could decide to allow relatively low tax rates which have been in place since Bush, to expire.
Douglas A. McIntyre