An interesting showdown is brewing. On the one hand, we have various surveys and forward-looking price indexes indicating a recovery is in process (Mark Perry is one of the regular trackers of these)
I think both groups are smart people with good ideas and intelligent, rational perspectives. But I don’t see how they can both be right.
We’re seeing a lot of consumer optimism, and optimism can be more powerful than the fundamentals. But it is also easier to lose optimism in the face of bad news.
So what’s going to happen next? Will shamanistic optimism “magick” the fundamentals into shape? Or will dour fundamentals crush the shaman’s spirit-calling, and plunge us into a double-dip recession?
My theory: I think the economy will get somewhat better, and then stagger a bit, with a very slightly positive growth rate for the next several quarters. Both sides will declare victory.