Recovery under way, but uncertain, economist tells suburban gathering
The economic recovery has begun, but how strong it will be is still up in the air, economist Robert Genetski told more than 400 people at an economic forecast breakfast Thursday.
Genetski, one of the nation's premier interest rate forecasters and investment advisers, addressed a wide range of issues from recent increases in the stock market to the housing market and government spending at the meeting sponsored by Cornerstone National Bank & Trust.
"It has been a rough two years. We've seen the worst economic downturn since the Great Depression," Genetski, one of the more bullish economists, told the crowd of suburban business leaders and wealth managers at the Cotillion in Palatine.
He noted that there are some positive factors giving him hope, but many unknowns lie ahead.
"We've had a nice gain in the stock market. But is this just another way to sucker people back into the market and then it will go back down again?" Genetski asked.
He added that he sees another period of weakness in the market before things improve.
Some improvement has also been seen in the housing market, he added. The collapse in building has forced the inventory levels to even out. He added that housing prices have remained flat.
Throughout the forecast, Genetski talked about the need for the country to return to basic economic philosophies found in textbooks. He believes China is doing just that and seeing economic growth as a result.
"We have to get back to the classic economic principles," Genetski said.
He sees the government moving away from these basics and strongly believes increases in government spending will ultimately weaken the economy instead of making it stronger.
He told the gathering that what he sees as the "failure of governmental policies" is hurting typical savers and consumers.
"Unemployment will stay high because of government policies," he added.
The economist believes tax increases for the middle class are ahead and will be difficult to swallow with such an unemployment rate that many economists expect to reach soon into double digits.
"This Congress and president and have indicated they want to increase taxes," Genetski said.
He does not believe stimulus plans, such as Cash for Clunkers, are going to stimulate the economy in the long run. He added that President Obama's health care plan is moving away from the classic economic principles.
The speaker told gatherers that some "serious challenges" will loom in the economy in the next three to four years. He sees interest rates going up this spring or summer.
He noted that "gold prices are going through the roof," which devalues the dollar and could lead to inflation.
While pushing forward, Genetski, suggested a need to focus on the economic stock market recovery, adding that the market recovery is cyclical. He also suggested that it's better to avoid bonds at this time.