In a Word: Uncertainty

During these challenging financial times we have focused upon a very positive word that we feel is the key to a stronger economy recovery. That word is confidence. This month we would like to focus upon another important word which is a negative influence -- uncertainty. There are many reasons that uncertainty is a hindrance. Most of all, uncertainty undermines confidence. For example, if companies are uncertain about the economy, they are less likely to hire. If consumers are uncertain about the economy, they are less likely to spend. Right now, the uncertainty factor is higher than it has been in some time and this is reflected in the economic pause of the past few months. Why is uncertainty higher? There are a myriad of reasons -- from Europe to the Presidential election.

Will Congress extend the debt limits well before the government runs out of money or will they wait until the very last moment? Will the Federal Reserve Board step up and take action to further stimulate the economy? We just received information about this question this past month as the Fed indicated that it will extend their program to purchase billions of dollars of government bonds and home loans in order to keep long-term rates low. It does not answer the question as to what the Fed is likely to do if the pause continues or gets worse. Remember that the Fed had previously attempted to take uncertainty out of the markets by pledging to keep rates low through the end of 2014. In other words, the Fed is doing what it can. We think that these actions are contributing to the more recent positive news we have seen regarding the housing sector. There is no sector within the economy that is more important to the economy and confidence. A stronger housing market is the one recipe to overcome today's uncertainty.