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Forget "W" and "U." ECRI says it's a "V" and possibly a capitial "V"
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Bad press, mounting pessimism and loss of confidence will not stop the bull from running. It's out of the pen and galloping ahead, according to Lakshman Achuthan of the Economic Cycle Research Institute. His organization has an excellent track record at calling turns in the economy.
The ECRI based it's analysis on what it terms a "positive contagion." According to ECRI, when key leading indicators line up and move in the same direction, as they are currently, growth is unstoppable. And it's not just output. They are talking about jobs, consumption and sales. Achuthan says that pessimism is a normal response to a deep recession but that the vast majority of employed people tend to make positive assessments about their own prospects quickly and return to more normal spending habits. This took place even after the devastating recession of 1907. They do not see the type of "liquidity trap" experienced by Japan that some economists like Paul Krugman fear might cause a protracted recession.
ECRI does not have a long range crystal ball however. But they feel confident that all numbers will look positive by mid 2010, that the recession ended this past summer, that the stock market is not overvalued as a result and that the "V" bottom may be a lot bigger than current forecasts.
