Better times may be ahead

By Tim Suffish CFA, CPA Vice President, St. Germain Investments Roughly one year ago, the market (S&P 500) bottomed out at an intraday low of 666. Strange, but true. For several weeks in early 2009 the market and our economy seemed to be on the edge of the abyss; many of those in the know believe that it really was. As difficult as it was at the time, with hindsight, buying that fear was obviously the right thing to do. In the year since, we have seen an almost uninterrupted bull market that has rallied global markets more than 65 percent higher. Those are numbers that we could get used to! While the market has rocketed higher, much of the data that we use as an economic report card has been mixed. Corporate profits, which benefit from cost cutting and belt tightening, have been incredibly strong. The cash coffers of large companies in America have almost never been fuller.business has stabilized, costs have been cut, and profits are good. On the flip side of corporate profits is the unemployment rate, which now stands at 9.7 percent. At the inception of the current recession (which we'll soon learn ended in mid-2009), the unemployment rate was below 5 percent and trending higher. Two and a half years later, with a credit crisis and market crash under our belt, employment has suffered greatly and millions of jobs have been lost. It may sound strange to say so, but this puts us in a position to enjoy some good news on the job front very soon. Low employment and strong profits result in strong productivity. We've just recently seen a surge in productivity, which, when preceded by good corporate profits typically leads to employment growth. We're not there yet, but the February employment report showed a modest decline in jobs (36,000), after a similar small decline in January. The combination of these factors suggests that we are approaching an inflection point; job losses are soon to become job gains. Across the pond we've been watching the drama in Greece, where federal budgetary problems have run afoul of European Union guidelines and have renewed concerns that there are more entities in need of a bailout (or at least some help). For now, the market is in forgiveness mode and is assuming that some sort of compromise will be reached; between the lenders, borrowers and union workforce that makes up so much of Greek society. Looking to the months ahead, we're likely to see the Greek situation resolved, and proactive budgetary measures by other sovereign entities that are currently on the caution list. If that happens, chances are very good that we'll finally see some job gains on our shores as well. Column provided to PRIME by: St. Germain Investment Management; 1500 Main Street, Springfield, MA; Phone is 413-733-5111 or 1-800443-7624; web site: www.stgermaininvestments.com