April 11th, 2008
04:15 PM GMT
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NEW YORK – The drumbeat of economic news coming out of the U.S. this week has been nothing short of dismal. Business bankruptcies are surging. The price of crude oil hit a new record high. Shipping company UPS, which is often seen as a barometer of economic activity, has warned profits will be down.

Former Federal Reserve Chairman Alan Greenspan went on record, saying the U.S. is most certainly in a recession. Former Labor Secretary Robert Reich went further, telling CNN there was a remote chance that the U.S. was in a depression.

Don’t tell that to investors on Wall Street. According to them, the glass is half full. It is a phrase I have heard used over and over again this week. That’s right - the group at the epicenter of the credit crisis is feeling cautiously upbeat.

About the stock market that is.

They agree the U.S. economy is pretty terrible. But many believe a lot of that bad news is already priced in. There are some signs they may be right. After hitting a 19-month low in March, the S&P 500 is now up some 7 percent. The Chicago Board Options Exchange volatility index, which measures the level of fear in the market, has been steadily declining since mid-March.

And it is not just the traders on the frontlines. On Thursday, Goldman Sachs CEO Lloyd Blankfein told shareholders attending the company’s annual meeting that “the markets are probably in the last stages of the global credit crisis that began last summer.” He added that people “feel like they’re seeing light at the end of the tunnel.”

Fears of a financial meltdown are slowly being replaced by the fears of missing any stock rebound. Many hedge fund managers had a terrible first quarter and can’t afford to be left sitting on the sideline if U.S. stocks start to march higher.

Sound like a massive case of wishful thinking? It could be. Some of the strongest rallies come in bear markets. But if you have the stomach for risk and keep a short-term perspective, this may be a good time to look at some beaten down U.S. names.

soundoff (One Response)
  1. Maria Giovanna Villari (Naples, Italy)

    Ok, Todd,
    recession. Is it the one of 1929? They said no. Is it going to last early? We dont' konw.
    As a neophyte economist I have to say something because I look at the new scenario like the one (scenario) who will show us a BIG world bank going to collect all our money, having theme by savings, salaryes, transcations, and other stuff.
    So in this crisis I might wake up in the morning beeing unable to spend what I had. And my sad position will be same to other trillions of world inhabitans.
    Is it a nightmare? Maybe not. Is the comunism coming out by capitalism instead of coming out by socialism.
    Marx is turnig over in his grave.
    But those who dont' want this equalization, so that more poor – all poor, will go against this by giving again investors, consumers, citizens, some small profit.
    The world crise will be controlled by capitalist.
    Maria Giovanna
    ps I go to Milan next week, so I might not write you. But I will try to read what you are comunicating us!

    April 12, 2008 at 8:42 am |

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