Now that the election is over instead of focusing on what is going to happen over the next 10 weeks until the inauguration, I thought it would serve our readers better to look further out. Over the next 10 weeks there are going to be numerous news items that will affect the market. Traders will analyze each cabinet nomination, especially the selection of Treasury Secretary. There are two more employment reports due out before the inauguration, the holiday shopping season, and the next earnings cycle will start before January 20.
Right now, everyone wants to know how President Obama is going to turn the economy around. First, it isn’t going to happen overnight. We aren’t going to go to bed on January 20 and wake up on January 21 and magically the economy is fixed. And this would have been the same had McCain won.
One thing that might change somewhat overnight is we could see a boost in consumer confidence. With things looking so dire, a change in leadership certainly couldn’t hurt right now. Kind of like when a sports team makes a coaching change in the middle of the season. All of the sudden the team goes on a winning streak with the same players. When leadership is changed, there is an attitude change. We better hope this is the case for the American economy.
In order for the economy to turn the corner and start improving, one of the big three has to start improving. I am not talking about GM, Ford and Chrysler. I am talking about the other big three.
What are the other big three?
As children, most of us dreamed of having three things when we thought about growing up: a nice house, a nice car, and a nice job. These are the other big three. Right now, these big three for most people are about as optimistic as the outlook for the automotive big three.
Over the past year, home values have dropped sharply, auto sales have dropped like a rock, and unemployment has gone through the roof. Before the U.S. economy can turn around, at least one of these markets is going to have to turn higher.
After the October payroll numbers were released, it isn’t looking likely the job market is going to be the one that turns around anytime soon. Adding the 240,000 jobs lost in October to the rest of the year, the number of jobs lost so far this year has reached 1.2 million.
Turning our attention to auto sales, the picture is much the same. October’s numbers are the worst since 1992. You might recall this was during the ‘91-’92 recession. Vehicle sales have been falling for over three years now after peaking in the third quarter of 2005.
Much has been written in IDE as well as other publications about the trouble of The Big Three. Without a doubt the U.S. automakers have serious problems, but as you can see in the chart, import sales are declining as well.
The third of the other big three, housing, may have the best shot at turning around first.
