Political and market change

The severe recession of 2008 /’09 was the most difficult economic period since the Great Depression. Growth in the years that have followed has also been weaker than the typical recovery. This has left many of us in a near constant state of worry about the economy or what financial problem may be lurking around the next corner.

But is it finally time to feel more optimistic about the future? We believe it could be.

Granted, U.S. and global growth prospects still face some headwinds over the next few quarters. In particular, higher taxes and some government spending cuts are likely to weigh on our growth potential here at home; and it may be a while longer before Europe returns to a state of economic expansion.

However, these seem to be some of the last vestiges of the "Great Recession."

Here are the top ten reasons I’m feeling more optimistic about the economy:

1. U.S. home prices are going up again, recovering from their lows.
2. American consumers have paid down their debts and overall are now in relatively sound financial shape.
3. U.S. banks are much better capitalized, and in most cases, solidly so.
4. Europe likely is not going to remain in recession forever, and may have hit bottom in the third quarter.
5. Borrowing costs are near historic lows.
6. Corporations are flush with cash and have strong balance sheets overall.
7. The pace of job growth is improving in the U.S., slowly chipping away at the unemployment rate.
8. European government deficits are narrowing and their debt ratios stabilizing.
9. Growth in the developing world is benefiting from better economic policies and expanding middle class needs.
10. Inflation pressures seem to be well contained, stock market valuations appear reasonable, and new technologies are dynamically changing energy production in North America.

Does our optimism imply that we expect the U.S. economy to suddenly expand dramatically? No. We believe the need for U.S. government austerity and the need for interest rates to slowly rise as demand recovers should keep the economy’s growth potential relatively in-check over the intermediate-term. Currently unforeseen problems will also creep up, such temporary issues always do. However, given what we see as the improvement in underlying fundamentals, we believe the economy could finally be in the early stages of a sustainable period of expansion and better days could lie ahead.

Russell Price is the Senior Economist for Ameriprise Financial, is a frequent commentator for Bloomberg, BusinessWeek and Reuters, and has appeared in many other media outlets. He was recently cited by Bloomberg Financial as a “Bloomberg Best” for being one of the most accurate economic forecasters in their benchmark consensus survey.

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