BlackRock's Weekly Investment Commentary from Bob Doll, Vice Chairman and Chief Equity Strategist for the week of Aug. 30.
There was some positive economic news last week, including initial jobless claims, which were less than expected. That number fell to 173,000 from 504,000 the prior week. Additionally, signs have been emerging that lending standards are easing somewhat. The Federal Reserve’s senior loan officer opinion survey showed that overall standards have been becoming less stringent and small bank lending has been increasing — a necessary ingredient for a broadening recovery. The economic highlight last week was a speech by Fed Chairman Ben Bernanke, who provided a fairly dovish outlook in his comments. Chairman Bernanke made it clear that more easing would be in store unless the economy improves. His statements should help ease some fears among investors who remain concerned about the possibility of a double-dip recession. His reasons for optimism included ongoing monetary policy accommodation, the improvement in consumer balance sheets, the stabilization of bank lending standards mentioned above and a general improvement in financial conditions that are becoming more supportive for growth. To be sure, there are a number of downside risks and the economy remains quite fragile. In particular, one aspect of the economy that remains troubling is the lack of business, consumer and investor confidence. On the whole, we believe that the economy is continuing to go through a deleveraging phase (particularly on the part of the consumer), but we maintain our view that the US economy is unlikely to experience a double dip and that the global economy will not slide back into recession.
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