Are the Green Shoots Indeed Sprouting?

Now that the equity market seems to be on teeter totter as it ponders its next move, I recently wrote that:

Now that prevailing sentiment has moved from “Armageddon is around the corner” to “green shoots”, the next turning point will likely occur when the fast money ponders the question of what happens next, now that we seem to have stabilized.

The next test

Certainly the macro picture is improving. There are sporadic signs of green shoots here and there. In addition to the US data, Brad Setser reports that there are also tentative signs of recovery in East Asia as the Korean data, which is the most timely, is pointing to recovery. After the close, we saw Intel (INTC), which is an economically sensitive semiconductor company, making positive noises about its 2Q outlook.

On the other hand, the Pragmatic Capitalist indicates that there is no sign of recovery in US rail traffic data. Moreover, Obama’s tax proposals could significantly diminish investors’ risk appetite (but then, someone has to pay for those enormous deficits).

The market has a way of saying “what have you done for me lately?” Now that a recovery is getting built into investor expectations, these negative fundamentals could prove to be a nasty surprise in the near term.

Watch out for the downside.

Comments

[keithpiccirillo]

No new money into anything but a day trade for me.
According to Roubini's latest blog there are few "green shoots".
In the old Cleveland Municipal Stadium in Ohio, they occasionally spray painted the dirt green to trick the eye.
Also, in May, if you plant your marigolds too soon, frost may ruin the growth of your investment.

2009 May 13 07:15 PM

[Old Trader]

Cetin,

Perhaps Obama DOESN'T want to raise taxes, but he still needs to keep the lib Dems (Pelosi, et al.) happy so he might have less choice in the matter. Plus, in the interests of keeping SOME semblance of control of an increasingly skyrocketing deficit, and mollifying the credit markets, his financial advisors might be counseling that politically "palatable" (aka "soak the rich") tax hikes are in order. Of course, until the AMT is changed, the defintion of "rich" may be in doubt.


On May 13 06:39 AM Cetin Hakimoglu wrote:

> Greenshoots may be justified. With the stock market on a tear and
> the economy improving Obama doesn't want to rock the boat by raising
> taxes, especially in an election season. He will most likely do nothing.
>
>
> ----------------------...
> On the other hand, the Pragmatic Capitalist indicates that there
> is no sign of recovery in US rail traffic data. Moreover, Obama’s
> tax proposals could significantly diminish investors’ risk appetite
> (but then, someone has to pay for those enormous deficits).

2009 May 14 01:10 AM