Word: stock-market
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...some cases, the fixes will take time. The NASDAQ just turned in the worst year of its 29-year existence, falling 39%. The Dow and the S&P 500 were also losers last year. The more than $2.5 trillion of vanished stock-market wealth since March won't be easy to get back. The NASDAQ, for example, would have to rise more than 15% a year for five years to return to its high. Meanwhile, consumer debt (excluding mortgages) has doubled over the past decade and averages nearly $15,000 per household. It will take years for borrowers...
...worry list, so the Fed chief has room to cut interest rates, probably starting late this month. Corporate profits, though slowing, will still be up in the coming year. Mortgage rates have declined sharply, putting a floor under home values. That's critical because despite the explosion of stock-market wealth over the past decade, the most valuable asset most Americans own is their home. The unemployment rate remains low at 4%, and many economists believe that even in a recession it wouldn't go much higher than 4.5%, so you'll probably keep another of your major assets--your...
...most important concept to grasp at this point is how the stock market interacts with the economy. Both run in cycles. But because investors focus on the future, the stock-market cycle is usually ahead of the economic cycle by six months to a year. With an unprecedented 49% of all American households owning stocks, and so much information available immediately via the Web and financial TV channels, this linkage is tightening. But there will always be a gap between the market and the real economy. That means stocks may be at their lows just as a slowdown becomes apparent...
...companies going opposite ways yet bound for the same place: Mediocreville. Both are trying desperately to avoid that end, one by boundlessly buying new businesses and the other by ripping itself apart. These are choices that companies face all the time, by the way, and they are critical to stock-market performance. One company is AT&T, which last week announced its third breakup in 17 years. The other is GE, which unveiled its umpteenth and largest acquisition--$45 billion for defense contractor Honeywell...
...heartland still basks in the good times the New Economy has made possible. Throughout the Midwest, consumers have been shrugging off the downturn in stocks and taking out home-equity loans to finance remodeling, or a new car or a European vacation. "There's not a chance this boom is over," says Diane Swonk, chief economist for Bank One in Chicago. "Consumer attitudes are high in the face of high oil prices, stock-market volatility and even election rhetoric. Most Americans live on Main Street, not in Silicon Valley...