The Economic Clouds are Clearing

We are excited, and very relieved to see this new evolving economic news to substantiate our enthusiasm for our Asset Allocation Model suggesting that we be fully invested in equities.  No matter how long you live, or how many times you witness the successful predictions, your faith still falters as you hear all the "doomsdayers" who are given full page attention during those bottoming junctures.

It is not being widely noticed, but for the first time since 2005, residential construction employment increased during four of the final five months of 2011 (up 0.8% in December and 7.1% over the five-month period).  I consider this a BIG deal.  There are a lot of reasons to give for the long-delayed recovery, but in my opinion, the biggest anchor to the return of growth is the threat of housing - a major part of any resurgence in growth.

Also, Friday's job numbers were great, and indeed, some of the indices made new highs not seen since at least the 2000 and/or 2007 peaks.  You can see the recent trend of Initial Weekly Unemployment Claims in the chart below from Calculated Risk.

Click on the image above to view a larger chart.  Click here to view the source.

Today's numbers are good and getting better.  When you recognize that companies (especially small business) have been so negative in their outlook and have now spent the better part of three years retrenching and doubting any chance of growth, you can see how the pent-up demand is going to produce a catch-up growth phase that will continue to surprise on the upside.

There's a lot of catching up to do as the economic dominoes - one by one - begin to accelerate the expansion.

Don Hays

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