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Originally posted by tide88
reply to post by stander
Actually the reasons the financials have gained so much is because they were way oversold in the first place.
The mid-term gains are made by sucker investors who believe that the market has bottomed out and are looking for a bargain.
Economists in the latest Wall Street Journal forecasting survey expect the recession to end in September, though most say it won't be until the second half of 2010 that the economy recovers enough to bring down unemployment.
Gross domestic product was predicted to contract in the first and second quarters of this year by 5.0% and 1.8%, respectively, on a seasonally adjusted annualized rate. A return to growth -- a modest 0.4% -- isn't expected until the third quarter. In the fourth quarter of 2008, the most recent period for which data are available, the economy contracted 6.3%.
"The end of the decline isn't the beginning of the recovery," said David Resler of Nomura Securities Inc. "It's like a boxing match. Even if you win the fight, it's not going to feel as good when you get out of the ring as when you went in."
The economists' forecasts indicate that the peak in the unemployment rate is likely to coincide with the midterm elections -- possibly bad news for Democrats. Even if the economy is growing, Americans still will be feeling the effects of the recession and could blame the incumbent. For example, when George H.W. Bush lost the presidency in 1992, the economy had been out of a recession for more than a year, but the unemployment rate didn't peak until June, and there was slow growth through the election.
Even when the economy stops shedding jobs, the unemployment rate is likely to remain elevated for some time. "The unemployment rate isn't going to recover, because you have to get back everything you lost and then some," said Joseph Lavorgna of Deutsche Bank Securities Inc. He estimated that the economy would have to grow an average of about 4% for six years to get back to the sub-5% unemployment rates seen in 2007.
But in Tokyo, it was a different story.
Shares of Sumitomo Mitsui (SMFJY: 2.87, -0.55, -16.1%) (JP:8316: news , chart , profile ) plunged 13.9%, retreating as the bank said it now expects to post losses, citing rising credit costs and impairment losses.
Other banks also declined, with Mitsubishi UFJ Financial Group (MTU: 5.24, +0.30, +6.1%) (JP:8306: news , chart , profile ) dropping 1% and Mizuho Financial Group (MFG: 4.22, +0.24, +6.0%) (JP:8411: news , chart , profile ) sinking 9.6%.
"If the 1980s profile were followed, output would continue to decline for up to another year and it would take two further years before the level of output enjoyed at the start of 2008 would be reached again," said NIESR director Martin Weale.