Wednesday 28 July 2010

No Double Dip?

The Pound has risen to a five month high against the Dollar, our derided ONS has published fantastic growth figures. All seems to be improving in the UK economy once again. Even the Prime Minister has remembered to go on a trip with business executives to try and help UK business.

This is all good news, in fact, good enough to say there will be no double dip this year. Now of course, I have been saying this all along, but with a caveat. I thought more QE would be needed to help the economy through, now it looks like this will not be needed again this year. Next year may be different as the cuts hit. but if the cuts continue to hit totally unproductive parts of the economy, like speed camera's, then maybe not.

Better news then for share prices. I resisted the urge to sell off in the July panic. Now it is quite likely that the FTSE below 5000 was the low for the year. In fact, it is quite possible the FTSE will re-test the high's of 5800 or even touch 6000 at some point this year. The death cross (where the green line cross the red line below) of July looks to have been negotiated and the uptrend can be resumed.

There are plenty of things to fret about and some events that could knock this newly germinated recovery off the rails; but confidence breeds confidence, so now is a time to be hopeful.

PS If you have never watched that Seinfeld 'Double-Dip' episode then you should, its very funny.


Sackerson said...

cf. 1974 - 1982.

CityUnslicker said...

maybe, but we started this in 07 with Northern Wreck, so this is not the beginning, its the middle. We also have a better Government and the country is not yet threatened by communist unions making the whole situation worse. Better still, our European neighbours are stuck in the euro giving us a comparative advantage for 50% of our markets. I am being very positive today as you can see!

Sebastian Weetabix said...

We are starting to see dropping demand in China. Normally business drops a little in the middle of August and picks up again in September, but orders started falling about 4 weeks ago. Since China is the workshop of the world I would say this is not a good sign. Interestingly our sales into the defence business (normally recession proof) are also dropping.

So, I am coming to the conclusion the double dip is almost upon us.

Bill Quango MP said...

There is an awful lot of discounting going on at the retailers.
Lots of blue X 20% on top of the summer sale prices.
Saw Sainsbury had a whole aisle of toys yesterday. That is a little early. School holidays have only just started.

Last few weeks for BQ industries, a little better. But May/June/early JULY was awful. Far worse that 2009.

Budgie said...

There are a lot of floods in China. And a lot of cold in South America. And a lot of heat in Russia. This may change global trading.

Steven_L said...

Surely the only scenarios that kill stocks long term are:

1) Gvt bond crash/rate rises
2) Deflation

Both will be fought with the printing press - stocks win (good ones anyway), but stoplosses off!