The worst is now behind us, really!

I am the perpetual optimist, but even I am not so absolutely sure that the worst of the financial crisis and economic recession and stock market decline are truly behind us and that 2009 will be a definite, if tepid, year of recovery, but that is in fact what I believe. Sure, there will be plenty of negative news in the next few months, and monthly GDP may not make its final bottom until later in Q1 and employment may continue to decline well into 2009, but there will likely be so much fiscal stimulus pouring into the economy by Q2 that GDP will bounce back quite strongly. Granted, this will not be a truly healthy economy at first since it will be on fiscal stimulus "life support", but it will not be much of a stretch for the stock market to believe that Democrats will continue to spend for years to come.

That said, the first few months of 2009 will be a real test of nerves for stock market investors since the continued flow of negative news (e.g., Q4 GDP likely to be down -6.5% with the final report not due until late March, plus ongoing negative employment reports) will result in a continuation of whipsaw volatility in the market. The market trend in Q1 will very likely be up, but with big dips to "test" each big gain. Enjoy the ride!

-- Jack Krupansky