Adjusting to Slow Growth

 | Sep 01, 2011 | 10:48 AM EDT
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You can see the new theory developing. We were in a weak patch in the economy, just a sluggish moment where restocking had occurred, but corporate spending was still dragging and home prices were just bumping along although the consumer was spending.

And then the government threatened shutdown and everything went kerflooie. Just awful. Everything. At the same time Europe fell off a cliff.

The rancor in Washington, which seemed to go on forever, died down. The threat of Social Security checks not going out and bills not being paid diminished. Germany didn't slow down so much to shut Europe down. China kept humming.

And we forgot about how bad the deficit deal was and we forgot how bad the Triple AAA news was and we, basically, went on a vacation from Washington-induced gloom. This ISM number plus the end of the decline in home values -- according to Case Schiller -- and the decision by Bernanke to keep rates low has created a stasis that seems to take recession off the table and allows for good stock picking.

Plus, we are nearing the end of the bad seasonality for tech -- witness Ciena (CIEN) not being down big on a terrible outlook.

All of these oddities are producing an environment that seems like an adjustment to slow growth, but nothing worse than that.

Which explains how we can be flat for the year on some of the averages. Given that there is no recession and the cyclicals are priced for one, they remain the place to be along with non-P.C tech, which seems, at last, to be putting in a bottom.




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