2009 Bernanke Stock Market Forecast

Ben Bernanke, Federal Reserve Chairman, recently predicted that the US economy would start growing later this year and expressed optimisim for the remainder of the 2009 stock market forecast. This has been the most optimistic forecast that Bernanke has made about the country’s financial status since the onset of the recession. Bernanke also mentioned that there appears to be improvement in the area of credit stresses. There appeared to be little reaction from Wall Street traders, however, and Bill Stone, a Chief Investment Strategist, commented that Bernanke’s comments were optimistic, but they really didn’t tell them anything new. Investors have kept in mind that it is typical for the stock market to turn around about four months before the economy does. Most traders have been selling treasuries and buying stocks in recent weeks, because of mounting evidence that the economy is turning around.

Bernanke’s stock market summary speech about his financial plan focused on monitoring rapidly escalating risks, such as the mortgage market, which collapsed prior to the recession. He spoke about troubleshooting for “evolving risk management practices” and identifying “regulator gaps,” including those gaps which affect the protection of consumers and investors and pose risks for the entire system. Bernanke also included in his speech that under “risk management,” bonuses and other compensations should have incentives which would promote the long term well being of the institution. He specified that capital and liquidity, along with effective risk management, were the keys to sound banking.

Bernanke, while speaking about the economic outlook, said that he continues to expect economic activity to bottom out, before then turning upward later this year. This stock market forecast view is based on the assessment made in reference to the housing market, which is beginning to stabilize. He also believes that the inventory liquidation that was progressing with such speed will start decreasing over the next few quarters and blue chip stock prices will continue to climb.