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The Recession Just Ended... Here's What to Do

By Dr. Steve Sjuggerud
Friday, May 29, 2009

"Another round of job layoffs this week," my friend told me. He's worried about losing his job.
 
He said his company has already trimmed all the fat... But the company's business hasn't recovered yet. So more job cuts are on the way.
 
It's too bad. Because I believe the recession is ending right now.
 
Unfortunately, companies – and investors – don't get it.
 
Since World War II, the unemployment rate typically peaks immediately AFTER a recession ends. Said another way, companies keep laying people off even though the recession is over. Why? Because they think tomorrow will look like yesterday...
 
Three years ago, people thought real estate prices "can't go down." They thought the next day would look like the day before. Now, people think real estate prices can't go up for the same reason.
 
But, my friend, the recession is ending...
 
Back on March 20, I'd showed you my "Script for Economic Recovery." I said stocks had bottomed and it was time to buy. And I explained exactly how we'd see the recession end...
 
By now, we've moved through most of the Script... Corporate bonds bottomed, copper bottomed, stocks bottomed. And as of this week, we've seen three consecutive months of improvement in consumer confidence.

The chart above shows how consumer confidence moves during the recessions (the shaded blocks). You can see consumer confidence hits a low at the end of recessions.
 
This recession has been bad... consumer confidence hit a record low. But the move higher in consumer confidence has been extraordinary... Over the last three months, the index has soared by more than 100%.
 
I believe consumer confidence has hit bottom. Historically, that's one indicator (of many) that shows the worst has passed.
 
History also shows stocks tend to keep rallying for many months after consumer confidence bottoms. It's true in every instance going back to the 1970s, when monthly consumer confidence data starts.
 
In short, companies and investors still feel bad. Employers are laying people off. That's normal at the end of recessions. And right now, I believe we're extremely close to the end of this recession, if we're not there today.
 
If you're a business and you've already trimmed the fat, now is not the time to be laying off more people. It's time to gear up for an improving economy.
                                       
If you're an investor and you thought the end of the world was here in March, now is the time to be in stocks. The market can continue to rally for many more months. 
 
The bill will come due on the government spending some day. But that won't be in 2009. The recession is ending. And things are getting "less bad" – which is the ultimate time to own stocks.
 
Good investing,
 
Steve 
 
P.S. For my favorite ways to own stocks, see the latest issues of my newsletter, True Wealth. We're up an average 13% in about a month on my "Back into Stocks" picks, with more to come. If you're interested in the best places to put your cash as we come out of the recession, click here. 




Further Reading:

A Dramatic Turn for the Better... Time to Buy Stocks

Up 800% on My Favorite Gold Stock... Hundreds More to Come

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HERE'S HOW TO TRADE OIL WITH "JUICE"


Today's piece is a study in leverage at work. A study in "juice."

In early March, we introduced the idea of owning high-cost oil producers as a way to play the rally in crude oil.

High-cost oil producers like those operating in the Canadian oil sands offer greater leverage to rising oil prices. When oil prices rise, their thin profit margins explode... and share prices follow. This gives the trader the "juice" he needs to make big profits.

An easy way to track this idea is with shares of Suncor Energy (SU). SU is one of the biggest players in the Canadian oil sands... and a favorite of large money managers. Since the beginning of March, crude has climbed 40%. Suncor, however, has climbed 70%. If inflation continues to boost oil prices, expect Suncor to provide the juice necessary to make huge gains.
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