Divergence Between Stock Market and Economy Remains

It seems, a bull rally since the lows of March 2009 is a single biggest contributor to the economical recovery. Stocks surged, jobs disappeared, and divergence between stock market and economy remained. There is $8 trillion of US public debt, which amounts to more than half of the total economic output (the US debt has risen more than 50% of GDP from 40% two years ago). There is a prediction of a $1.35 trillion US budget deficit for 2010. The government may keep borrowing and keep spending beyond its means until the markets might decide that America is heading toward bankruptcy.

A record 2.8 million households were threatened with foreclosure last year and this number is expected to rise this year. One of the strongest US industries is Hi-Tech. The performance of chip companies is considered to be a leading indicators for demand for other assembled technology products. However, the US center of technology, Silicon Valley, suffers job losses, a drop in investments, lack of foreign talents, and other signs of weakness.

Is bear back?

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