Sensible Investing

About a month ago, I wrote that a re-test of November’s lows was possible.  Well, we are at that point today, at least for Dow Jones that closed just a fraction above its closing price of November 20.  The current concern is the lack of details in the government’s banking plan about what specific steps are going to be taken to shore up the financial system.

Despite the drop, most economists still predict slow 0.7% growth in GDP in the third quarter.  The economy is expected to continue shrinking in the first and second quarters.  Typically, stock market anticipates recoveries and bottoms out about six months before the recession end.  However, many commentators contend that since this downturn is so severe, there will be no sustainable rally until actual evidence of a recovery emerges.  We’ll have to see, but “it is different this time” types of predictions usually don’t pan out.