Today was the first trading day of the year. If it's any indication of how the rest of the year will go, then things look bright! The Dow Jones Industrial Average closed up 258 points, or 2.9%. The first trading day put the market over 9,000 again for the first time since November 5th. But I wouldn't count on this great start as an indicator...
The first trading day of 2009 fell on a Friday, after a holiday, during a week of vacation for many people. Trading has been really light for the past two weeks. With Christmas Eve on a Wednesday, Christmas on Thursday, New Year's Eve the following Wednesday and New Year's Day yesterday, the trading activity has not been something that anyone should look to for an indication of sentiment or a precursor of what's to come.
But there has been some good news. Mortgage applications are at their highest level in two years. That doesn't mean that all those applications are being accepted, but it does point to some activity in the housing market. Although I believe housing prices may have a bit further to fall, the uptick in mortgage applications may be a sign of some coming relief.
The coming year is going to be challenging economically for the US as a nation, and for the global economy as a whole. We are likely to see increased unemployment, slowed earnings growth, and further corporate bankruptcies. We will eventually come out of this recession, but when we do, I would not expect rapid economic expansion. There will be a number of ongoing challenges related to the financing of the bailouts, and my guess is we are going to see higher tax rates, not just for the "wealthy", but also reaching back down the income ladder to the middle class.
