Moderate optimism began to wash over the markets last week, as the S&P 500 Index rose 3.7 percent and the Dow Jones Industrial Average increased 2.9 percent. The rally was driven by several factors, including an improvement in the tone of various economic releases, primarily the much discussed labor report and a strong announcement on manufacturing. Based on releases from last week, it became more apparent that the economy is on track for a period of slower growth and that the possibility of a double-dip is still slim.

The unemployment rate in the U.S. refuses to decline, despite a perceived recovery that began more than 12 months ago. While it is too early to declare whether structural problems are overtaking cyclical unemployment factors, it is obvious that labor markets in the U.S. are not as dynamic as in previous recoveries. Geographic immobility, economic uncertainty and a lack of skilled workers are elongating the headwinds faced by the economy, raising fears of a long and slow economic recovery.

Over the past several months, bond and equity markets have been on starkly divergent paths. Investors are growing increasingly concerned that perhaps the bond market knows something that the stock market is overlooking. One reason for this divergence is corporations. Emerging from one of the most severe recessions in the last century, companies are more than willing to hoard cash and favor a 'wait and see' approach before resuming expansion. Meanwhile, individual investors continue to sell equities in favor of fixed income securities.

The decline in productivity during the first quarter has an interesting implication for both the corporate and consumer sectors. For corporations, it is an indication that profitability will remain strong as prices increased faster than costs. The gains were 2.4 percent and 0.2 percent, respectively. From the consumer standpoint, it appears that businesses have sucked every last ounce of productivity from current employees. If that turns out to be true, then corporations will hire additional workers, bolstering spending and encouraging further hiring.

Consumers face a challenging environment in the second half of the year as stubbornly high unemployment and stagnant wages will limit their ability or desire to spend. The rapid improvement in corporate profitability should encourage hiring at the beginning of 2011, but the road will be long and bumpy. Meanwhile, a series of economic reports this week are likely to provide confirmation that economic growth is slowing.

Democrats who were previously in favor of allowing the Bush-era tax cuts to expire at the end of this year are suddenly swimming in the opposite direction, with several favoring extensions to the tax credit, given the poor economic backdrop. It is easy to find evidence to support both camps, but the simple reality is that economically restrictive policies will create a drag on growth at a time when the economy can ill afford them.

Investors found reason to cheer last week after a round of impressive earnings reports buoyed confidence. The challenge for the broader economy, however, is that companies are becoming more profitable but are unwilling to pass on those gains to their respective employees. Instead, they are stockpiling cash at the expense of employee compensation. Moving into the second half of 2010, as executives begin solidifying budgets for the next fiscal year, we could see an uptick in hiring.

Last week's reports on the Consumer Price Index and the Producer Price Index only served to confirm what everyone already knows ? any discussion of budding inflationary pressure is nave at the moment. It is too early to write off a full-blown deflationary episode. In addition to weakness at the consumer and producer levels, the rate at which money changes hands (a common means of inflation) is near its slowest pace in years. Other problems facing the U.S. are a rising personal savings rate and ever-slower demand for commercial loans.

When the crowd is zigging, it is best to trust one's contrarian instincts and zag. The ratio of bearish to bullish investors has steadily risen since early May, when concerns about sovereign stability began to unravel. In the week ending July 8th, 57 percent of individual investors reported being bearish in the intermediate term, against only 21 percent that hold a bullish stance. Investor sentiment is sitting at the lowest point since March 2009, and we all know what happened in the intervening months.

While it is easy to remain pessimistic on the state of the economy, especially following the events of 2008, the signs of a double-dip recession are simply not there yet. Slower growth is a given at this point, but this should not come as a surprise considering that it has been well-documented that previous stimuli would become a detractor to growth in the second half of 2010 and through 2011. Further stimulus packages are already being debated, even in the face of fiscal tightening by countries across Europe, as politicians face difficult battles at the polls.

Despite positive predictions for the housing market, existing home sales fell in May. This may be due to a number of first time buyers who snapped up distressed properties, requiring a longer wait between contract acceptance and closing date. At the same time, new home sales plummeted and median home sale price fell. A glimmer of hope exists in this market as home prices are in the positive over a year-over-year basis.

The resurgence in risk appetite continued apace this past week, allowing the S&P 500 index and the Dow Jones Industrial Average to return to positive territory for the year. By the end of the week, the S&P was up 2.4 percent and the DJIA finished up 2.3 percent. The recession of 2008-2009 seems to have left a mark on many individuals, however, especially those in the baby boomer generation who are inching ever closer to retirement. This is fueling a reallocation away from equities in favor of bonds and income-producing securities.

Equity indices logged solid gains this past week, with the S&P 500 index up 2.5 percent and the Dow Jones Industrial Average up 2.6 percent. The positive outcome was a result of light trading on Thursday and Friday, although it appears there is little conviction in the rally, with trading volume falling well short of the 50-day average over the course of both days. A measure of confidence from the Yale School of Management shows that individual investors are becoming disenchanted with the market, which makes them hesitant to buy equities during periods of correction.

Market forecasters are worried about the state of the Chinese real estate market, with one publication after another declaring that an asset bubble is only moments away from popping. Clearly the recovery in the Chinese real estate market is impressive, perhaps curiously so, but the dynamics of the Chinese market indicate that an asset bubble is nowhere to be found?for now. From an affordability standpoint, the price-to-income index is on the rise, but well below the levels seen in the U.S., the UK and even India.

Consumers shook off the cob webs and made an exceptional comeback over the past 12 months. They are still tenuously overextended, however, and are unlikely to provide a necessary boost to economic growth in the coming quarters without serious improvement in wage or credit growth. The household debt ratio remains above the long-term average, but is returning to a more appropriate level and indicates that the consumer balance sheet is slowly being realigned. Fortigent also comments on government responses to sliding stock prices, and the week ahead.

Despite the $1 trillion rescue package, Greece and other small European countries will probably still default on their debts. As it stands now, Greece faces two scenarios: default or endure years or even decades of deflationary growth. The root problem for the PIGS is lack of competitiveness within the euro area - an inevitable consequence of the one size fits all interest rate policy. Even if the PIGS governments could slash their fiscal deficits, the lack of competitiveness within the euro area calls for years of relative deflation.

News was generally supportive of equity prices last week following the decision by European countries and the IMF to provide financial support to the euro area. Fears of a 'double-dip' recession are beginning to creep into popular lexicon, however, after the possibility was raised by the likes of economist Nouriel Roubini and Research Affiliates chairman Rob Arnott. Those fears appear unfounded in the near term based on the recent Philadelphia Fed survey and the current steepness of the Treasury yield curve.

Last week's sell-off clearly resulted from a buildup of tension in technical factors coupled with overriding concern about the unfolding debacle in Europe. Numerous signs were flashing the caution light prior to last week. On the other hand, even though the technical factors were ready for a breakdown, a majority of the economic releases from last week suggest the recovery is still in its infancy. Investors should brace for another volatile week following the announcement that Europe will ready nearly $1trillion to bolster its capital markets.

Last week, Standard & Poors downgraded the credit ratings of both Greece and Portugal. Citing the blatantly obvious, S&P pointed to Greece?s 'political, economic and budgetary challenges' as the reason for the downgrade. More troubling for holders of Greek debt was the revelation that S&P only expects a recovery between 30 percent and 50 percent of capital should Greece be forced to restructure its debt. The recently finalized bailout from the IMF and European Union will stave off those concerns for the time being, but Greece will not be out of the clear for another several years.

It is clear that more and more people are becoming cautiously optimistic about the recovery unfolding around the globe, but a number of risks remain unresolved and will likely stay that way for years to come. That should provide plenty of fodder for both economic pessimists and optimists. Investors should brace for a bevy of news from every angle this week. The Federal Open Market Committee will meet on Tuesday and Wednesday to discuss the latest state of the economy. Expectations are for the fed funds target rate to remain within a range of 0 percent to 0.25 percent.

The world is entering a period of rapid aging unlike any we have previously seen. According to a recent report by Neil Howe and Richard Jackson there are several key implications due to an aging population. As populations age, decreased mobility and adaptability will restrain economic growth and entrepreneurship, leading to higher public deficits as governments shoulder a greater percentage of health and retirement costs. Fortigent also examines the impact of the SEC investigation of Goldman Sachs on equity markets, and the week ahead.

It may be convenient to assume that a revaluation of the Yuan would lead to a readjustment of the US trade balance, but it is more likely that production would merely shift to the country with the next lowest costs. Gains in Chinese imports in the early 90s came at the expense of imports from other countries. In addition, politicians fail to recognize that many manufacturers in the US import production inputs from China, and so a currency revaluation would directly affect their ability to remain competitive. Fortigent also comments on rising equity markets, and the week ahead.

Global equity markets closed out the quarter well, with all major world indices except China posting positive quarterly performance. Earnings improvements, dramatic P/E expansion and a slowly recovering global economy all contributed to the run-up. Several potentially dark clouds, however, float across an otherwise sunny investment sky. One is simply a function of the extended market rally and corresponding expansion in market P/E ratios. By several indicators, the market seems to be veering into over-valued territory. Fortigent also comments on muted but real GDP growth, and the week ahead.

As much as we would like to assume that a 30 percent peak-to-trough decline in home prices returned housing prices to fair value, that may not be the case. Housing markets are proving that an endless supply of liquidity can only mask underlying weakness for so long. Without jobs, no amount of principal forgiveness or interest rate reduction will allow homeowners to suddenly begin paying their mortgages again. Fortigent also comments on the IMF's plan to back Greece's debt, the new Federal Reserve public relations tour and the week ahead.

Equity markets posted gains last week on news that inflation was muted and that the Federal Reserve would continue holding down interest rates at low levels for an extended period. The core consumer price and producer price indices rose just 0.1 percent in February, and the Fed's target federal funds rate remained between 0 and 0.25 percent. Leading economic indicators, however, have taken a weaker turn in recent weeks. Negative contributions from a shorter manufacturing workweek and falling stock prices were the biggest detractors.

A number of reports released in the past several weeks confirmed that global trade is rebounding sharply from its 2008/09 lows. Relying on exports to drive economic growth is a perfectly plausible strategy, but final demand in many of the developed economies is unlikely to return to its previous highs in the near future. Maxey also examines the failure of small businesses to join the recovery, and the week ahead in economic news.

The Federal Reserve Beige Book confirmed that the economy shows signs of expansion, but that labor markets show only tentative signs of improvement. The S&P 500 went up 3.1 percent and the Dow Jones Industrial average increased 2.3 percent after last Friday's employment figures were not as bad as expected. Real estate activity is picking up, but officials are still apprehensive about what will happen when the home-buyer tax credit expires at the end of April. Maxey also looks at this week's upcoming events and releases.

While some in the financial press blame credit default swaps for Greece's fiscal woes, the impact of CDS on the country's finances is actually quite small. Greece racked up massive amounts of debt long before CDS even existed, and net CDS have hardly moved as the Greek financial crisis has spiraled out of control. Maxey also comments on rising equity prices, improving GDP growth, new restrictions on short selling, declining housing figures and this week's upcoming data releases.

Equity markets settled down tremendously this past week after a week of volatile trading, posting a 3 percent gain for the S&P 500 index. Subsiding fears about the impact of Greece on global markets support market gains. The CBOE Volatility Index fell in February to 20 from a high of 27. Maxey also comments on mortgages, inflation, and upcoming data releases.

Equity markets were still oversold based on a number of momentum and sentiment measures last week as buyers pushed the both the S&P 500 and the Dow Jones Industrial Average indexes to volatile 0.9 percent gains. Headlines this week should center on Greece's bid for explicit financial support from other Eurozone members, as well as a slew of new economic data.

Fortigent senior analyst Chris Maxley says equity markets are quickly approaching oversold territory. The S&P 500 lost a mere 0.7 percent last week despite heightened market volatility. Sovereign credit issues continue to loom over markets, and improved earnings are still not inspiring traders.

This is a review of last week?s market activity and economic data announcements, with a focus on the GDP announcements from the UK and the US.

?Some pundits saw fit to blame China for the recent pullback [in US equity markets], as a result of the monetary tightening occurring in that country, but such an accusation is unfounded in our opinio

The problem for the Treasury moving forward is twofold. For one, interest rates have nowhere to go but up. At the end of 2009, the average interest rate on all outstanding US debt stood at 3.3%, a f