The following is reprinted with permission from the May 2010 issue of the Investor Advisory Service, published on April 23, 2010 by ICLUBcentral Inc. StockCentral subscribers can save 50% on a subscription -- see the StockCentral Discounts page for details.

Investment Comments

Even as recently as a month ago, we were fielding questions about rumors of a double-dip recession. Our comment was that we didn't see anything at all pointing in that direction. Perhaps much of the negative sentiment had to do with the depth of the recent economic downturn and the shock to our collective psyche.

As time goes on and more economic statistics roll in, the case for sustained economic growth becomes more convincing. The primary holdout up until now has been jobs. We just completed our third straight quarter of economic growth in gross domestic product (GDP), but jobs growth has been positive in only two of those nine months. The most convincing number was the 162,000 jobs gained in March. It was very impressive to see job growth in every major category: manufacturing (for the third straight month), retail, construction (which showed growth for the first time in almost three years) and temporary help (a precursor to permanent hiring).

Detractors can point out that the unemployment rate still stayed high at 9.7%, but even this reflects optimism. The workforce swelled in March as previously discouraged workers started looking for work again. Temporary hiring by the Census Bureau boosted overall hiring by 48,000, so one should discount this number of jobs since they are only for a few months. Still, this is the best news we've had in quite a long time that the economy is starting to get going.

The Purchasing Managers' Index showed the highest level of growth in the factory sector since 2004. This indicator has been positive for eight straight months. Seventeen of the eighteen industries in the index reported growth. All ten of the indexes' components registered improvement.

Consumer spending rose for the fifth straight month in February. Personal income was flat in the month, but this may be due to severe winter weather across much of the U.S. that softened employment and perhaps incomes as well.

While the signs of growth are broad-based and encouraging, the rate of growth remains fairly modest. This is probably for the best as too high a degree of stimulus in the economy could cause inflation in an environment of strong economic growth. Long term, we remain more concerned about the potential for higher inflation and how the Federal Reserve Board is going to sop up the extra liquidity than we are about the durability of the economic recovery.