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Initial reaction to stimulus

Agriculture.com Staff 02/20/2009 @ 2:06pm

It appears the market voted a lack of confidence on its initial reaction to the stimulus package pushed through Washington this week. There seems to be a growing concern that the stimulus package is more of a social package than a job creating package. The market smells this and consequently reacted by pushing lower in all sectors, stocks and commodities.

Blue chip stocks took a significant hit with the Dow Jones losing close to 10% in less than a week. Outside markets continue to concern themselves with not only lack of confidence in the stimulus package, but also on growing concern that U.S. debt will be burdensome for generations to come. As for commodities, most took a major price slide on expectations that economic conditions will worsen before improving.

The analogy that sometimes medicine has a sour taste is hopefully the case here. The initial reaction may be negative based on the taste or smell of a package that doesn't appear to have broad-based appeal from an economic recovery standpoint. Yet, there is always that chance and hope that over time, these government actions will lead to an economic turn around.

However, there is also that growing concern that a lopsided Democratic-backed policy could lead to significant long-term spending requirements that will not only strap consumers with debt but also act as a drag on confidence. Entrepreneurship has a spirit that, when ignited, can move forward. There are many questioning whether this package is igniting entrepreneur spirit.

There is also concern this package mirrors one that was used in Japan in the 1990s. Japan has since sunk into prolonged economic difficulties and has not recovered to the level they were in the 1980s when considered the second most powerful economy in the world next to the U.S.

Regardless of what people may think now, action has occurred and only time will tell its actual impact. It appears the market's near-term concern suggests a lack of confidence, but from a long-term perspective, one has to hope that the market is overreacting now and that ultimately, the economic ship is in the process of being righted.

If you have questions or comments, contact Bryan Doherty at Top Farmer, 1-800-TOP-FARM ext. 129.

It appears the market voted a lack of confidence on its initial reaction to the stimulus package pushed through Washington this week. There seems to be a growing concern that the stimulus package is more of a social package than a job creating package. The market smells this and consequently reacted by pushing lower in all sectors, stocks and commodities.

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