Market Commentary for the week of March 4, 2013

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The national debate about fiscal cliffs, credit crises, and sequestration clouds the fact that several reversals in fortune might accrue to our favor.  If the Fed perceives low economic activity as a result of sequestration, they might be inclined to hold interest rates low, ultimately benefiting stock activity.  Another one of the most potent of those changes is the global redistribution of sources of energy.  In particular, how the U.S. has now become a net exporter of energy supplies.

As our country emerges from an horrific generational recession it should be noted that great momentum usually emanates from periods of disadvantage.

If this seems counterintuitive to you, consider that consumer and federal debt is actually declining even though common sentiment, and politics, tells us otherwise.  While the size of the contraction might be small, more businesses, homesites, and agencies are operating leaner and meaner following the financial crisis of the past five years.  Notably, as our dependence upon foreign sources of oil diminishes, the financial ramification of that savings weaves its way into the fabric of our economy.

At the same time, the U.S. is exporting more energy commodities, such as natural gas, and providing fodder that energy independence might be a realistic goal.  At the very least, the trajectory of the change is accelerating.

New phase.

Technology plays a role in this new energy dynamic, as it does increasingly in many facets of our economy.  Where we ultimately go with this transformation is yet unknown.  But the global and domestic dynamic has certainly evolved following the recession.  More countries now rely upon us as a supplier of fuel.  Our technological innovation and resources give us the leverage to be a net seller into the global marketplace.

But politics and economics are also inextricably linked.  The proliferation of “holes in the ground” is also an environmental issue.  While we may have the resources to “drill baby drill,” we must also measure our moral imperatives against the profit motive.  The planet we leave to our kids has as much to do with clean air and water and unfettered views as how much money we make. 

It is undeniable that we need energy to exist in our modern society.  Still, many flock to our shores for quality of life.  These might be easier questions to answer now than they will be in the future.  Finding a satisfactory balance is the saga of our time.

Forward or back?

The recession also got rid of a lot of excess in other businesses, too.  Manufacturing and healthcare are experiencing a rejuvenation.  While the financial benefits might not have accrued to the average worker just yet, I would certainly hope that an employment boom will occur commensurate to the need of corporations to compete for new business.  Similarly, as the population, and workforce, gets older we could have a healthcare crisis.  We wish not only to grow rich, but to grow old with dignity.

The markets understand these changing demographics.  While short-term rallies are not the stuff of “trends,” we have picked up from off the floor to a recovery that makes some feel “better” about their financial well-being while profits are growing. A secondary issue is confidence and how the average citizen perceives his opportunity for a stake in the game.  How you answer that question is, today, largely a function of how much money you already have.  As that paradigm shifts to include more of the not-so-wealthy, the answers to a sustainable economic recovery might become more abundant.