Weak Start as Economic Woes Affect Investors

Wall Street struggled throughout the day yesterday. According to CNNMoney.com, the flat results of the Dow Jones, NASDAQ, and S&P 500 were largely the result of corporate earnings facing off against a failing economy. Investors braced for a weak start to trading today and have largely seen markets drop during the morning.

According to Reuters, despite the façade of stability on Wall Street, investment markets are still in peril. There are enough warning signs from sectors of the investment economy for analysts to worry. Unfortunately, if you only watch the overall composite trends you completely miss the underlying instability.

In other news, according to Bloomberg, capital goods from U.S. manufacturers climbed in June 2010. This could be seen as a sign that American companies are investing more in production. It could also be a sign that one major windfall – like the Boeing 787 Dreamliner – is pushing the entire sector along.

In Europe, MarketWatch is reporting that despite the G-20 talk of austerity the Bank of England wants more monetary stimulus. The BOE seems to be the last major European holdout on Keynesian economic principles. While the rest of Europe wants to cut deficits and develop a more austere outlook, England does not want to abandon stimulus and deficit spending just yet.

The problem with both sides of the argument is that it ignores the underlying dilemma. Austerity is fine if you are truly concerned about long-term fiscal stability. Stimulus is fine if you are using directed investment to create jobs. In this case, the austerity is more concerned about cutting entitlements than building stability. The stimulus, meanwhile, is more about saving corporations than employing the people in productive jobs. The two, austerity and stimulus, could work together if not for the fact that the current conception of each is off-base.