CHICAGO - the return of the Stock Exchange conducted a more than two years rapid clip. Yet the economic recovery have been agonizingly slow.
Now, a spate of disappointing economic news is interrupt the market rally. He has money managers examine whether the market can come out of reverse and still leave the sputtering economy in the dust. If this is the case, credit the same factor that has pushed stocks 89 percent since their bottom in March 2009: save the profits of the business.
This is a concern that will be back at the top of the mind to the Morningstar Investment Conference. Financial planners almost 1 700 and fund managers in Chicago this week to a more complex picture on the location of putting money for their clients.
It is difficult to find clear choices and two years after the official end of the recession in June 2009, with 9.1% unemployment, declining real estate prices and low consumer spending.
Stocks have fallen five weeks in a row and appear directed to a sixth. The standard & poor 500 index is decreased by 6% since the end of April. Many financial analysts believe that this decline is more serious that the market of the other breaks in the last years of two - over.
Chuck de Lardemelle, who co-manages a pair of stock and bond funds, IVA Global and International IVA, recently trimmed inventories holdings in its two funds approximately 68%.
His primary concern: the recoveries in the economy and the market may be unsustainable unless consumers feel enough confidence to spend more freely. It is crucial to their spending, because he led approximately two-thirds of the economy.
"People are not interested in the expansion of the House, or buy a new car, because they are in bad shape," said Lardemelle.
Yet, the profits of the business remain record levels, due in part to reductions of expenditures made during the recession. It is the main reason for Lardemelle think stocks could continue their comeback, despite the difficulties faced by consumers.
"It's the golden age of corporate profits," he said.
These indicators show that the different routes took the economy and the market - and why fund managers are therefore concerned:
THE ECONOMY
? The economy is recovering at a slower pace that she following past recessions. Gross domestic product of the country - total production of goods and services economy - has increased by 3 per cent in the first 12 months of this recovery. Which was about half the growth in the first year average 6.2% on recessions since 1949, according to Standard & Poor Equity Research. The growth rate has continued to accuse the historical average in the just-completed second year of recovery and is predicted to start in the third.
? Unemployment is off the coast of its peaks, but it is still high. The unemployment rate was 9.1% last month, compared to 9.5% the end of the recession. This is a decrease of 4%, more than two years. Coming out of previous recessions, improvement in the unemployment rate has generally been much more rapid - 14 per cent on average at this stage of a recovery, according to Moody's Analytics.
? Wages are only creeping higher. Hourly compensation is 3.3% since the end of the recession, according to Moody. It is approximately one third of the average increase of 9.8% at this stage of a recovery. If wages increase not fast enough, consumers can not help the economy.
? Housing recovery remains difficult to achieve. A report last week found in large metropolitan areas of real estate have sunk to their lowest level since 2002. Given that the bubble has burst in 2006, prices have fallen more than during the great depression.
THE STOCK MARKET
? Stocks had much stronger back. The & S P 500 is 45 per cent of the end of the recession.
Which is well ahead of the average gain of 24 percent historically validated at this stage of a recovery, according to Moody.
But there is an objection, market pros who know well. If historical trends hold up, any gain market in the third year of this recovery should be modest. The average gain was 4.9%, according to S & P.
? Companies realize benefits Records. Wall Street analysts expect year round operating among the S & P 500 profits to increase by almost 18% this year, according to S & P Equity Research. This would have made 2011 a record year. In 2012, another record is planned, with a projected increase of 14% of earnings. But another warning: heavy equipment such as Caterpillar and Cummins and manufacturer of consumer same Procter & Gamble products generate much more in addition to their earnings abroad, where emerging markets are more sustained growth.
Stocks look again good markets. Coefficient of the S & P 500 - a measure that shows investors how much they pay for dollar gains - is modest by historical standards. P/E, based on the functioning of gains for the past 12 months, is 15.5 - below the median of 18.1 since 1988, according to S & P. The market is still cheaper, with a P/E of 13.7, based on projected earnings for this year.
Brian Peery, a Fund Manager Hennessy, point to such data by arguing that the bull market is not an end. He expects fellows on average about 8% per year over the next three to five years. Double-digit gains not likely, given the rough patch, in that the economy is.
An important short-term challenge is the gradual reduction of a program of bond-buying 600 billion by the Federal Reserve known as quantitative this month easing below. It is one of a series of stimulus measures that the Government has taken to promote investment in risky as stocks assets.
Then there's the deficit, which has worried Lardemelle because investors are likely to grow increasingly more pessimistic about the ability of the Government to respect its obligations. They may require higher yields, raising costs of borrowing for the Government to further hamper the economy.
"Their response was," Let's print money and hope that the consumer is "," of Lardemelle, U.S. policy makers. "The consumer will be back soon."
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AP Personal Finance writer Dave Carpenter contributed to this report.
Do you have any questions? E-mail investorinsight (at) ap.org
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