It is no secret that for the last few years, the U.S. and global economy has been in the tubes.  We have witnessed many unprecedented events on wall street that has shook the confidence of consumers around the world, and many people are feeling down and out due to the extremely high unemployment rate that we are currently experiencing.  Many people today are walking away from their housing obligations, either because they simply cannot afford to pay the mortgage any more, or they can afford to pay but their house is worth significantly less than what they paid for it.  The global debt crisis, stemming from my ancestors the Greek’s, is the most recent global concern that has taken on the world stage.  Through all of these events, we are now brought to the end of the fiscal 2nd quarter, 6/30/2010.  Below I will highlight my thoughts on the future trends of the U.S. and Global Economy.

Unemployment

The unemployment rate is hovering around 10% in the united states.  It is such a hot topic political issues, that it is sure to dominate the senate and house races come November.  Although the rate is at 10%, the true unemployment rate is likely to be much higher as the current system of documented those who are unemployed does not take into account those individuals who have stopped actively looking for a job due to the fact that they don’t want to succumb to working at a profession that they are overqualified for.  Although it has been documented that the stimulus package has help save and create millions of jobs, which without it, we would be in much worse shape, there has still been many jobs losses during the same period, which essentially is keeping our unemployment rate flat.

Outlook:  The trend for the rest of the year will be a flat unemployment rate that will hover around 10%.  There will not be any significant events that will increase or decrease the unemployment rate significantly, as both domestically and internationally the growth prospects are looking fairly static.  The result of this lack luster performance will be a more educated public, as many individuals are heading back to school in order to be prepared for when the work environment gets better.

Housing

Cash is king in this environment.  If you are fortunate enough to have a little cash set aside, you can become extremely wealthy in this real estate environment.  However, if you are one of the unemployed noted above, or simply had some circumstances which forced you to sell your home, then chances are you will be receiving a much lower amount for your property if you sell at this time.  In the same breath however, some homeowners are relocating, and although they are selling their house for cheap, they are also buying a new house for cheap, which would serve to level the playing field.  Interest rates are near the lowest they have ever been, and the affordability of housing has never been better.  However, the availability of this credit to the people looking to purchase homes is still not flowing fluidly.  The rental market has become very competitive as many tenants now have more options dues to higher vacancy rates.  This is also putting a pinch on investors who made bets that their mortgage was going to be paid by the tenants who live in their building.

Outlook:  It would appear that the housing prices will remain flat, or even drop in certain areas around the country for the remainder of this year.  Once the prices stabilize at the end of the year, we will experience a 5 year period of little to no appreciation in home values.  I attribute this to the fact that the foreclosures in this country are still moving ahead full steam.  There is an estimated 1 million homes that have been foreclosed on in this country that have still not hit the market yet.  Better yet, we have not yet experienced the full wrath of the commercial real estate bubble bursting, which will put further pressure on housing and real estate prices from appreciating.  The fact that our economy will also remain flat and job creation will be slow in the making, also will put a damper on any appreciation as more people will put purchasing housing on the back burner, and decided to rent rather than buy.  The rental market will be a bright spot during this period of time as more qualified people who use to own their home will be renting before they buy again while they repair their credit.

Energy

The BP oil spill has put the spotlight on the oil industry in a major way.  The spill threatens to cause major harm to the local economy of the gulf coast, as evident by the news we are hearing of the fisherman who can no longer make a living in the region.  Tourism also will suffer, as beaches are becoming dirty from the oil that is brushing on to the shores.  Prices have not spiralled out of control for oil at the current moment, as the demand has not particularly increased the the supply remains enough to meet the current demand.  Alternative energy sources such as wind and solar power are still not the most prominent in use, and oil is still currently dominating the marketplace.

Outlook:  No huge breakthroughs in other energy sources will be created in the short time left through the end of this year.  However, the BP oil spill has irreparably harmed the oil industry, and there will be an increased emphasis on renewable energy sources to fuel our way of life.  In my opinion, this spill is what the country needed to realize that our earth is expendable if we don’t treat it with respect.  It’s wrath is evidence through the rogue oil spill.  The price for oil will also remain static for the rest of this year, and will only begin to increase again when the economy and the consumer begin to grow once again.

Global Debt Crisis

The debt crisis that has been evident for the past several months came into the spot like when Greece reached out to the European Union for help when it became evident that their cost to borrow money to meet their debt payments became to high.  There was real concern that they would not have enough money to make good on their obligations, and would default.  individual consumers have been defaulting on their loans throughout the economic downturn, but if a country was left to default, it would have serious implications on the rest of the world, particularly if Greece defaulted in the European Union.  These fears of default have had a negative effect on the EURO currency, as the U.S. dollar has appreciated greatly against the EURO since the crisis began.  The Union of Europe had stepped forward to re-assure the investing world that they would not allow Greece to default, which served to ease the rhetoric for a short time, but other countries within Europe had similar issues with their sovereign debt as well, sparking another round of fear.

Outlook:  Globally, the economy is so interconnected that to allow for an industrialize county to default on their debt would be a huge mistake.  Too many negative events would roll in motion, sparking even more countries to default.  Thus, for the rest of this year, I see additional safeguards being implemented by the International Monetary Fund, as well as global central banks to ensure that the global economy does not spiral downward for a double dip recession.  Once this tactic globally is established, it will make way for additional confidence in the market place, and added value to stock portfolio’s.

Summary

In summary, we are at a point in the U.S. and Global recovery of trying to turn the hump from the bottom of the recession to achieve sustainable economic growth once again.  The global economy is committed to ensuring the recovery is a lasting one, and this is evident from the record low interest rates seen around the world.  Governments are providing liquidity and jobs to the market place, specifically through stimulus packages world-wide, and this is helping to keep the economy working while the private section recovers from the worst recession since the great depression.

The goal is that these government spending efforts will hold the economy up for just long enough for a lasting recovery to take hold.  There have been some signs that this has been working, but the overwhelming negative factors are blocking the world from seeing some of the signs.  In any event, it is not for me to point these out.  What is for me to point out is that there are opportunities in any economy.  Ways to make money in any economy.  If you keep a keen eye for these opportunities, there will be a windfall of profit and wealth to come to those who take the first step.

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