A Wave of Good News: What is the Impact?

By Jeff Burnstein, President, RIA

Until very recently we’ve been inundated with bad news on many fronts. Instability in Pakistan and Afghanistan. High unemployment in the U.S. Chrysler declaring bankruptcy. GM still on life support. Swine Flu raging. Robotics sales down dramatically.

Yet, in the past few days, we’ve seen a wave of good news. U.S. stock market rallying. Demand for India’s Tata Motors’ new $2000 Nano car very high. Ford re-tooling and re-opening a shutered factory. Apparently no major U.S. banks in danger of insolvency. U.S. housing market stabilizing. New jobless claims in U.S. falling.

What does it all mean? How do our members factor in these conflicting developments to a rationale plan to forecast the future of their business?

Will the wave of good news clean up all the damage from the bad news? Or, will the bad news continue to spoil the business landscape like an oil spill that won’t easily wash away?

Most pundits now say that the long awaited economic recovery is in sight. If not in the latter half of 2009, then very likely in 2010. Yet, they predict it will be a weak recovery, no sharp acceleration of business.

And yet, I wonder if the conventional wisdom is right since it changes so quickly these days. Two days ago swine flu was on the verge of becoming a worldwide pandemic. You couldn’t turn on any news outlet without this being one of the top two stories. Today, it’s barely mentioned.

A few days ago I read financial stories on how “cash is king” in the investing world. Today, holding cash appears riskier than being invested in equities.

The world changes more quickly than the so-called experts can react. While the conventional wisdom may indeed be correct this time and the reovery, when it comes, will be weak, it’s also possible they are wrong and that the recovery will be stronger than expected. The downturn certainly was — I don’t remember any conventional wisdom warning us that business was going to fall off a cliff in late 2008 early 2009 (though some individual forecasters may have had it right).

As we make our own plans and assumptions for the remainder of 2009 and 2010, we will factor in the conventional wisdom of a weak recovery. But, we also will make sure we’re prepared for a stronger recovery fueled by the waves of good news that could be forming behind the current wave.

What plans are you making for the recovery?


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