A number of economists predict that the recession could last into 2010 and unemployment will top 10%. If the crisis does not deepen into an even longer downturn, there will have to be early signs that the credit crisis is ending and that consumer and business confidence are coming back, Douglas A. McIntyre of Time writes.
The author of the article has pointed out six the most likely signs that the economy has bottomed and is about to move up.
1. The S&P 500 to trade flat for three months. While it continues to move down, investors are expecting two or three more quarters of bad earnings. If it spikes up too early, a rally probably cannot be sustained. A flat market at least indicates that investors are becoming more at ease with the economy.
2. Most of the large
manufacturers are experiencing monthly drops of over 45% compared with last
year. It may take a year or more for those numbers to settle at drops of closer
to 10% to 20%. But, if
3. From a global
perspective, the trading in bonds for developing countries that might default
on their debt, nations such as
5. The stimulus package has
to begin to pay off. As its earliest investments go into helping states and
municipalities keep their employees, cuts in place like
6. Finally, when the government investment in banks and insurance companies drops below a rate of $100 billion a month and begins to slow to much more modest levels as the number of firms that need big bailouts decreases, it means that the period of huge catastrophes has ended and that normal credit availability from the Fed has returned as the major method for feeding the credit markets.
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