The Economy - In a Holding Pattern...So Far

Recent economic figures have been consistent with the view of lackluster-to-moderate growth in the near term – not a recession, although the risk of a renewed downturn remains. Whether the U.S. slips back into recession depends on a number of factors: gasoline prices, developments in Europe, and policies that may or may not come out of Washington, D.C.

The consumer sector is not quite as bad as some expected, but spending is not especially robust and weak growth in real incomes is a major red flag.

Lower gasoline prices, if sustained, should provide more of a boost to inflation-adjusted spending later this year and in early 2012.

Nominal wage income growth had been moderate, but slumped in August. One hears an awful lot about how weak this job market is, but it’s worth noting that the two most recent recessions also had very gradual job market recoveries.

Corporate profits and cash flows are strong, helping to support business fixed investment. However, we’re still facing significant drag from fiscal policy and Europe is a major question mark. The anxieties of September are likely to continue into October and beyond.

Measures of consumer confidence and sentiment have fallen sharply, though they improved a bit in September. A recent Gallup poll reports that a record 81% of Americans are dissatisfied with the way the nation is being governed. Only 15% approve of the job congress is doing.

Political rhetoric, congressional inaction along with the European drama will continue to feed volatility and uncertainty.

We continue to invest accordingly, managing risk over return with an increased level of caution.

Sincerely,

Larry Cavalena
Registered Principal

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Opinions expressed here are Larry Cavalena’s not necessarily those of Raymond James Financial Services or any of Raymond James affiliates. Expressions of opinion are as of this date and are subject to change without notice.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

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