Two key months for the economy

The two coming months, March and April, will be a critical juncture for the economy. Best case, March and then April will show nice up-ticks in economic activity as the housing market moves past a bottom. Worst case, March and April both show dispiriting down-ticks as lingering weakness in housing drags down the rest of the economy a bit more. My conservative best guess as to the most likely trajectory for the economy is that March is a volatile month, giving mixed signals of growth and weakness, but then April shows a more clear "hint" that the economy really is on a steady, but modest upwards path, the culmination of the soft landing.

One big wildcard is commodities prices and the activity of speculators in those commodities, such as the hedge funds. If the prices of commodities such as oil and gasoline remain persistantly high, as they are right now, that will be an indication that there is still way too much cash sloshing around in the financial system, and this fact, inflationary pressure, could cause the Fed to raise rates again, to 5.50%. That rate is still in the so-called "neutral" range, so any risk of "causing" a recession is negligible. But, such a rate hike would not come until May when we have hindsight to tell as the state of the econmy coming out of this critical March and April period.

Watching and listening to the commentary on the economic reports of this period will not be an activity for the faint of heart. For most investors, it would be best to close your eyes, sit tight for the ride, and then open your eyes in early May and then decide what state the economy seems to be in. Much of the "advice" that you will be hearing from the so-called "professionals" of Wall Street will be designed not to enhance your well-being, but to strip as much of your assets as (legally as) possible. DO NOT listen to any of the "sky is falling" stories that the pundits and bears and cynics will be vigorously promoting at even the hint of a raindrop.

-- Jack Krupansky