Economic Report
I've been told, if you watch the Tour de
France bicycle race, you will notice that for much of the race, there's a lead
group of closely bunched riders called the peloton. Occasionally, someone from
the peloton will launch an "attack" by sprinting and trying to break
away from the group. Sometimes the peloton will follow the "attacker"
and catch him while other times, the "attacker" will succeed in
putting some distance between himself and the pack.
The economy seems to be following a similar
pattern.
For the economy, the peloton is akin to the
funk we've been in for the past year. It seems like each week we get a batch of
economic data that confirms we are still in a slow grinding period. But
occasionally, like the "attacker" from the peloton, we get a piece of
economic data that gives us hope that perhaps we've turned the corner and will
break free from the funk. We've had those slivers of hope off and on over the
past year but each time they turned out to be false alarms.
Despite generally positive earnings reports
and decent economic news, the markets have not overcome the relentless beat of
the drums of war. The ticking time bomb in
Although the past is not always predictive
of what may happen in the future, it might be helpful from a perspective
standpoint to look at how the markets performed during the 1990-1991 Gulf War.
Prior to the start of the 1990-1991 Gulf War, the Dow Jones Industrial Average
dropped about 18% between
From a market perspective as it relates to
the Gulf War, the threat of war was much worse than the actual war. When it
became clear that the allies would win handily and with much fewer casualties
than expected, the markets rose. While we talk about the market impact of war,
it's trivial compared to the horror of war. The human cost and the
psychological cost can be painful beyond measure and our hats are off to the
men and women serving our country.
But, like the Tour de France, one of these
times, we may get a batch of economic data that confirms we've broken out of
the funk and left the economic peloton behind.
Favorably resolving the Iraqi situation
could be the trigger that starts it all.
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