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Searching For The Silver Lining

9 March 2009 - Features - Editor

Embattled Wall Street traders have been on the lookout for signs that the market is bottoming out, but as the weeks pass by with major indices reflecting an ever declining market, it appears that the question of “Are we there yet?” is becoming impossible to answer. Last week saw the Dow Jones industrial average falling 6.17 percent to end at 6,626.94, while the Standard & Poor’s 500 shed 7.03 percent to end at 683.38 and the Nasdaq composite lost 6.1 percent to close on Friday at 1,293.85. This means that both the Dow and S&P have plunged by around 24 percent, and Nasdaq by nearly 18 percent, since the beginning of 2009.

While many are throwing their hands up in despair and others are bailing out of the market in desperation, there are still a few optimists around who are determined to look for that elusive silver lining in the dark storm clouds of economic turmoil. Here’s what some have come up with. Firstly, while the seemingly unrelenting decline in the market confirms that the current recession is likely to be long and ugly, the recent fall in stock prices means that they can now be considered to be fairly priced. If current trends continue, prices are likely to fall further, which is bad news for the owners of those stocks, but it does mean the end of the unsustainable over-evaluation of the market and economy, and with housing prices dropping to more realistic levels the prospects for future positive asset returns have improved.

Another reason for a measure of optimism that has been highlighted is the fact that US government officials, and on a broader scale global governments, are working hard toward a unified goal – that of stopping the downward spiral of the economy, turning it around and working toward prosperity, with much attention being given to assisting all citizens gain and maintain the necessities of life, including housing, food and health care.

With quite a large portion of the blame for the current financial and economic downturn being laid at the door of U.S. consumers who have been spending far more than they earn, it is interesting to note how quickly consumers are adjusting to the reality that those days are over. Advice columns and talk shows are highlighting how consumers can tackle their new circumstances with a positive attitude and how the entire family can get involved in cost-cutting exercises. This has had a positive spin-off in that families that take this advice to heart are becoming more united. Surveys have also revealed that, although times are tougher than they have been for decades, many consumers are determined to start saving to allow their families to have something to fall back on in an emergency situation.

Due to the fact that US government officials are dealing with a number of unprecedented factors, there will be mistakes along the way – after all, hindsight is the only perfect science. With that in mind though, it appears that lessons learned during the Great Depression are being taken into account in decisions that are being made now – and learning from past mistakes may just increase the odds for a more positive future.

 


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