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Financial Hangover: What Happens When the Party EndsWhatever the case, once the glitz of the inauguration ball is over, the then President Obama will have to face a hostile economy and investment climate. He has pledged a massive infrastructure strategy to create jobs and get the U.S. economy back on track, but it will not be that simple, as there will be numerous factors out of his control. First of all, the economic slowing has spread worldwide and this will impact the demand for U.S. goods and services. Unless this reverses, the U.S. economy will continue to struggle. The current world crisis needs more concerted efforts from world banks and governments in order to prevent a deflationary setting and a potential depression. Yes, the near-term outlook is not good and could get worse. A major risk continues to be the distressed jobs market. ADP Employer Services did a survey that showed the loss of 693,000 private jobs in December, adding to 476,000 jobs lost in November. The results are not a surprise, as the jobs market remains a significant concern that will continue to drive down consumer confidence and spending. A weak non-farm jobs report on Friday will confirm the weak jobs market. Again, the fear is that reduced spending will drive down prices and create a bearish deflationary setting. The Federal Reserve added fuel to the fire after saying that the economy will worsen in 2009 with negative GDP growth and that unemployment will rise into 2010. The Fed minutes also indicated some concern from the Fed regarding deflation, which I have talked about in detail in a recent commentary. The market is constantly talking about the economy and slowing, but there is very little discussion of the rising threat of deflation, which is serious and, in fact, is what drove the Great Depression. Consumers have continued to hold back on spending; we could see more price cuts by retailers. The fear is that, if this trend continues, it would result in a deflationary environment, which is not good. Deflation will make consumers refrain from spending and wait for lower prices. The concern is that reduced spending would drive down corporate activity and this could lead to more slowing and a potential depression such as the Great Depression, which was impacted by severe deflation. This could mean more hard times for investors going forward into 2009. I'm not trying to scare you, but you should be aware the situation could get much worse in 2009 before we see any reversal from the current negative investment climate. Profit Confidential --- http://www.profitconfidential.com/ LOMBARDI PUBLISHING CORPORATION News, Analysis, and Information Services Since 1986. One Million Customers in 141 Countries. Lombardi Publishing Corporation Financial Publications Division 350 Fifth Avenue, Suite 3304 New York, NY 10118-3304 --- Copyright 2008; Lombardi Publishing Corporation. All rights reserved. No part of this e-newsletter may be used or reproduced in any manner or means, including print, electronic, mechanical, or by any information storage and retrieval system whatsoever , without written permission from the copyright holder. Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHORGeorge Leong, B. Comm., Senior Editor at Lombardi Financial, has been a
technical analyst for 12 years and a financial analyst for seven years.
His overall market timing and trading knowledge is extensive. George is
the editor of several of Lombardi’s popular financial newsletters,
including The China Letter, Special Situations, and Obscene Profits,
among others. He has written technical columns for stock market news
web sites, and he is the author of Quick Wealth Options Strategy and
Mastering 7 Proven Options Strategies. Prior to starting with Lombardi
Financial, George was employed as an analyst with Globe Information
Services.
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