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Economists and public policy professionals, among others who closely follow the economy, often get asked questions at dinner parties about where the U.S. economy is headed.
Many who ask know a great deal about their own line of work, of course, but often don't know much about the U.S. economy's overall performance, and that's not surprising, given our busy, time-pressured lives these days.
One short-hand I offer those who who don't have the time to review the U.S. Federal Reserve's Beige Book data or the U.S. Labor Department's jobs report, is to keep an eye on General Electric Company's (GE) operational performance, and, by extension, its stock performance.
It's often been said that diversified industrial giant GE "is a mutual fund in one company," but the company is in fact an even more-telling barometer than that.
In fact, one can say that, "as GE goes, so goes the United States" -- the company's operations represent that large a portion of the U.S. economy -- industry, heavy equipment, technology, energy, home and business, military contracts, commercial aviation, media, green technology, and finance.
Most are aware that losses in GE's Capital Finance unit compounded a cyclical downturn in business triggered by the 2007-2009 recession, and GE's stock reflected the chilly days, sinking below $5. Overall revenue fell 14% in 2009.
But the recession finally gave way to recovery in 2010, and most sector trends currently are running GE's favor: demand trends in industrial, aviation, technology, health care, energy services, and green tech all bode well for GE in 2011. And GE's stock, which meandered at $16 for much of 2010, appears poised to trend higher.
And not surprisingly, the trend for U.S. GDP growth, barring another wave of the financial crisis, or an unforeseen oil shock, suggest accelerating GDP growth in 2011.
I first discussed GE on March 2, 2009, at a price of $13.80, and needless to add I still like the shares here.
Still, the larger point is paramount here, even if you don't consider GE's shares. If you want a quick-read on the U.S. economy, take a look at how GE is doing operationally, and how its stock is doing.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
12-03-2010 @ 6:22PM
Raymond R. Murray said...
G.E. IS DIVERSIFIED BUT NOT TRUE AS A BAROMETER OF THE STOCK MARKER, THAT'S ALL HOGWASH. THE TRUE BAROMETER OF THE STOCK MARKER IS GENERAL CONDITION OF THE ECONOMY, STUPID AS REFLECTED BY THE UNEMPLOYMENT FIGURES AND THE SALES AT WALLMART.
12-04-2010 @ 7:51AM
Dan Barnett said...
I would respectfully suggest that one finds the "Caps Lock" button on the middle left of the keyboard, before one calls anyone else stupid.
12-08-2010 @ 9:13AM
realamerican said...
GE has always been the "bell-weather" of the economy. GM also was a bell-weather. GE stock has been depressed for quite some time now. The depressed price of it's stock came about the same time Jack Welch was leaving. I have some $40.00 GE stock. I am not happy about it. Immelt is not the CEO everyone thinks he is. He is in the pocket of the U.S. Government and vice-versa. I do not like his arrangement with the President. I also do not like the fact that he is shutting down light-bulb plants and putting people out of work. I do not like the idea that GE is a leader in lighting technology and is eager to get the government business while Immelt is a financial advisor to the president. I do not believe GE is an American company anymore with American interests at heart or mind.