US economy starts to provide investors with reasons to be upbeat

Following significant fiscal and monetary stimulus, optimism regarding a US economic recovery is building with the change in Q3 2009 GDP expected to be a positive 2.2% following a 1% decline in Q2 2009 and a worse 6.4% contraction in Q1.

However, many of the indicators of improvement are in the form of diminishing negatives rather than outright positives. A recent Fed survey found fewer banks are tightening lending standards and restricting credit but this does not mean that banks have started to increase credit availability on a widespread basis. The same survey indicates loan demand is still contracting, but at a less rapid pace. While bad loans held by the largest US banks rose over 20% sequentially in Q2, this represented a slowdown from the rapid pace of deterioration in the previous several quarters.  Early indicat...