Looking Ahead at a Stealth Recovery

The new year is here. It doesn't feel much different than last year. A more sanguine look at this upcoming  year may bring hopes of a slow economic recovery. Yes, governments worldwide have instituted or will instill fiscal stimuli to stave off the great recession. Yes, lower interest rates may be a boon to struggling homeowners as refinancing becomes a viable avenue. Yes, the credit crunch appears to have loosen just a little bit. Yes, Obama brings new hope to America and to the world, frankly.

But, there are so many more downers. Unemployment is relatively high and affecting morale. Savings rates are low and cash-strapped consumers are in an uncomfortable situation. Corporate earnings are ratcheted down, significantly, and may come down even more. Confidence in the financial system is broken. The list keeps getting longer and longer. Just think of the recent Madoff scandal. Once you open a can of worms, look out!

The picture is bleak. I don't deny that. What I take respite in is just that - the public's perception is in the sewer. We will not realize that things are better until AFTER THE FACT. We are preoccupied and will continue to focus on the gloom-n-doom scenarios. It's just human nature. So, what I want to touch on is that the economic road to recovery will hit us before we know it.

The Fed lowering interest rate was Step 1. The denial is large as so many are crying that "You're already at zero; What? You think you can go negative??"  There are other options the Fed can take that doesn't include interest rates.

The economic stimulus package is Step 2. The denial is prevalent as well as many are saying "How much more debt can we take on?" "Obama hasn't thought this thru." Rebuilding America's infrastructure is arguably the smartest way to improve our economic outlook. It also overflows with tangential benefits. Almost too good to be true, in my opinion, if we can successfully role this out.

The resilient American consumer is Step 3. Unemployment is off the recent charts. Personal savings are at the lowest levels in recent history. But, we fail to account for greater wealth distribution, greater asset allocation. People are financially smarter today than 10 years ago. The world is smaller but the opportunities are greater.

The corporate earnings story is Step 4. No one's shopping, so how can companies make money? So many store closings and bankruptcy filings are occurring today. However, there will be a better environment after all this happens as only the strong will be around to cater to us. Mergers and acquisition will come back into play. Innovation and the American entrepreneurial spirit will roar back into place. 

Again, these are just some of the "stealth" events that are happening now or will occur in the future. When they happen we will not fully see or accept them. That's just human nature to dwell on the recent past/present and not fully embrace change until after the fact. The recession has been here. We were slow to adopt it. The recovery is probably already here as well. No one has adopted that yet. We wait for data points, but numbers are backward looking at best. I am not proposing that we return to pre-collapse charts; nothing occurs exactly the same as before. I am, however, saying that the road to economic recovery will occur slowly and unexpectedly. When everyone accepts it, we will have missed out if we're not already invested. That's it.