U.S. May Be On Verge Of A Big Comeback With A Double Back-To-Back Economic Recovery

Source: Forbes

For the first time, a highly respected and reputable economist with a huge impressive Wall Street following is suggesting that President Barack Obama could win reelection as he lays out well-grounded arguments that a “double back-to-back” economic recovery is within sight.

Dr. Ed Yardeni, president and chief investment strategist of Yardeni Research Inc., which has a large following among U.S. and global institutional investors, says the U.S. economy may be “on the verge of a huge comeback” and could “experience an ununsual second recovery over the next three years, following the weak initial recovery of the past three years.”

Lets’s be very clear, though. Yardeni, a conservative economist with a pragmatic approach to analyzing and interpreting the U.S. economy and what’s going on in the global economic picture, isn’t forecasting an Obama victory. Rather, he is pointing out, in his daily online newsletter for clients this morning, that several signposts strongly suggest that a second economic recovery may be on its way, for which the President could take all the credit for, and which would then turn the November elections his way.

True, the naysayers have been predicting a “double-dip recession” for the economy since the recession started in 2009. “I am suggesting that a more likely scenario might be a double back-to-back economic recovery,” says Yardeni.

The noted economist and investment adviser points out that in a second economic recovery, “President Obama is more likely to win a second term.” That’s because the unemployment rate is likely to fall in such a scenario, consumer confidence will brighten up, and stock prices will move higher – “and President Obama could take credit for it all — and he would win if enough voters give it to him,” argues Yardeni.

He underscores the facts that have been evident all along: The economy lost lots of jobs, and so far employment recovery has been anemic, with payrolls still 6.1 million below the record high set in January 2008. The housing situation has been in a depression, with the national single-family existing home median price down 28.9% since it peaked during July 2006, and home foreclosures are in the millions. The upturn in auto sales has been subpar and fiscal policy hasn’t been as stimulative as in past recoveries because there has been lots of fiscal drag from state and local governments. In the past, recessions were followed by one, not two, recoveries.

Indeed, the key sectors of the economy haven’t participated in the initial rebound.

“But finally we may be on the verge of doing so,” says Yardeni. Indeed, real GDP is up 5.5% from the recession trough during the second quarter of 2009 through the third quarter of 2011, to a record high of $13.3 trillion, Yardeni points out.

“The second recovery could take off as the pace of hiring quickens, housing activity finally picks up, auto sales head higher, and state and local governments stop retrenching,” says Yardeni. ”If so, then the U.S. would finally enjoy the benefits of a broader-based recovery,” he adds.

What about Europe and the impact of its problems on the U.S. economy? Here is what Yardeni says: “It could trip up America’s recovery, or maybe not.” While a depression in Europe might depress the U.S. economy and S&P corporate profits, there is another side to this story: “Better-than-expected growth in the U.S. should help Europe’s recession,” argues Yardeni.

So what’s Yardeni’s advice for U.S. investors? What should they do now that the outlook for the U.S. seems to be improving while the outlook for Europe is clearly deteriorating?

“U.S. investors should stay close to home,” advises Yardeni. For global investors, the U.S. “once again should be a safe haven in 2012 as it was in 2011.” And if Europe falls apart, “then the only safe havens are likely to be the U.S. dollar and U.S. Treasuries,” says Yardeni.

URL to original article: http://www.forbes.com/sites/genemarcial/2012/01/17/u-s-may-be-on-verge-of-a-big-comeback-with-a-double-back-to-back-economic-recovery/

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