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Investing Specialists

The Shifting Tide of Economic Growth

The current sources of economic growth are not what they were a few months ago, says Morningstar's Bob Johnson.

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Investors endured another volatile week on Wall Street courtesy of yet another round of European uncertainty with, again, a positive ending at the end of the week (at least when I went home on Friday night). Whatever happens, I don't believe a weakening European economy is enough to sink the United States economy, although the potential impacts on the worldwide banking industry should give anyone pause before making aggressive investments. Frankly, no one knows the state of the banks for certain. But, I would wager, the U.S. banks are in much better shape now than they were going into the recession at the end of 2007. I can't say the same for the European banks, which were not recapitalized as aggressively as their counterparts in the U.S.

Trade and Jobs Look Slightly Better
On the economic front, the U.S. trade deficit improved modestly, potentially aiding third-quarter GDP revisions. The improvement came despite a slowdown in exports to Europe. There were also a number of minor employment reports this week that seemed to indicate a continued improvement in the U.S. job market. Reported job openings were at their best level since 2008. On the negative side of the ledger, the European Commission took a hatchet to their 2012 growth estimates while retaining their 2011 outlook.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.