Market Talk

Lots of talk focused on how earnings reports and economic data haven’t been as bad as expected, which could fuel the economy back to prominence. But looking past the market’s recent 20% gains, it’s time to be realistic and realize that the economy’s problems won’t be fixed overnight.

Simply because key economic data points – like ISM data, new and existing home sales and nonfarm payroll – are coming off historic lows doesn’t mean the worst is over, FusionIQ CEO Barry Ritholtz writes on his blog.

“In reality, things are getting worse, but more slowly,” he says. “What is happening in the real world is  the change in the rate of fall. The direction is still negative – the economy is still contracting – but it is doing so at a slower pace.” That decelerating pace could be labeled as stability, but economic expansion’s at least several quarters away, he notes.

And even with the market’s recent run-up, it seems the bear market will continue stumbling along the bottom, says Roger Nusbaum, an investment adviser with Your Source Financial. Volatility will continue and there’ll be no meaningful progress out of the current trading range.

“The bear market is now 18 months old and investors do not feel like they have a lot of answers and there is little visibility at this point for the recovery,” he says.

On the bright side, there seems to be less certainty that the S&P 500 will go to 500 or 600 anytime soon. “My hunch is that it would take a different type of news (and I don’t really know what that would be) to take the market that much lower,” Nusbaum says.

Another interesting indicator of the economy’s direction may be the airline industry. The economic boom during the mid-2000′s brought air-travel horror stories as airlines operated over capacity, resulting in a miserable experience for many travelers, the Freakonomics blog notes.

But as the economy tanked, fewer people flew last year, which translated into the sector’s best overall performance in four years, according to the annual National Airline Quality Rating report. The result? Fewer delays and cancelled flights last year as well as fewer lost bags and overbookings.

“Maybe it’s time to add airline service quality to the list of economic indicators,” Freakonomics says. “But is it a leader or a laggard?”