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Economic Update by BetterTrades Analysts

While the American stock markets have shown some resiliency this spring, we're probably not out of the woods just yet. The world economy is expected to shrink this year for the first time in six decades, which might lead to more than 10 million jobless people around the world. Some U.S. economists believe the American economy will be on its way out of the hole by the end of the year, but that recovery could be hampered by other problems around the world. The United States and every other developed nation remains dependent on its trading partners to become economically solid.

There are several areas of concern that need to be examined closely. They could give us a clue as to whether the American economy is really ready to move up.

The automobile industry: The problem with car and truck manufacturers isn't strictly an American problem. Honda and Toyota have had troubles and German giant Volkswagen announced recently that its profits were down 74 percent. The German government has put together a pair of stimulus packages worth more than $104 billion. Investors are waiting to see what will happen with General Motors and Ford, the two American biggies who are struggling to survive.

The housing industry: Analysts warn that the worst is far from over for the housing market. Now that the big cities have taken the initial foreclosure hit (Florida, California and Arizona have been hammered), the housing struggles will begin to filter into the second-tier cities. Business Week said recently that housing prices could drop another 25 percent over the next two or three years. That means fewer new homes being built, which means unemployed contractors, which means further stagnation.

The banking industry: Bank losses in the United States are expected to total $1.6 trillion before 2010 ends. The International Monetary Fund estimates that the industry will need $275-$500 billion in fresh capital. It's possible, but unlikely, that the federal government would temporarily take over some of the struggling banks.

Meanwhile Americans try to come to grips with the end of this recessionary period. There is growing sentiment against further bailouts, as citizens are asking, "Who's next?" We don't really know. The new administration is still trying to get its footing and is no doubt learning on the fly. But until those three sectors begin to show some life, it will be hard to experience a complete turnaround. We could still be in for a very rocky road.

- by BetterTrades Financial Analysts