There have been several prominent economists who expressed extreme views for the economy. They told us to expect zero growth in the fourth quarter and an economic collapse to begin in early 2007.
The outcome should be a meltdown in our financial system with stocks sagging 20-30%.
They might be right. Eventually. Maybe. It is a fact, however, that their dire scenario did not materialize. Investors who followed their advice would have missed a great move in stocks in the past 6 months.
I like to follow some indicators that in the past have had a good batting average in keeping me out of trouble.
The trend in short-term interest rates can be assessed daily. The same can be said for bond yields and commodities. Their level and trend represent the market view of what is happening and is likely to happen.
And right now they seem to depict a fairly stable environment. If their message changes, I will gradually change my investment strategy.
Excessive views are seldom correct. If they happen to be correct, the markets have a way of warning you.
More on www.peterdag.com.
George Dagnino
aka Peter Dag
Editor, The Peter Dag Portfolio
Since 1977
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