The world isn't flat. But the market is. By Paul R. La Monica, editor at large

NEW YORK ( -- What do pancakes, tapeworms, old soda and the stock market have in common? They're all flat.

With nearly seven months of 2010 in the can, stocks are trading right about where they began the year. The Dow closed at 10,428.05 on December 31, 2009. It opened on Monday at 10,424.17.


Of course, this long journey back to where we started has hardly been boring. Stocks have been on a wild roller coaster ride. They surged on economic recovery hopes in the first quarter -- only to plunge in the second quarter thanks to renewed fears of a global double-dip recession.

Now investors are digesting the latest results from big corporations and analyzing their guidance for the remainder of the year. So we must ask, in the immortal words of Axl Rose, "Where do we go? Where do we go now? Where do we go?"

It's not an easy question to answer. Sure, some companies are growing increasingly optimistic. 3M (MMM, Fortune 500), Eli Lilly (LLY, Fortune 500) and Whirlpool (WHR, Fortune 500), for example, all boosted their outlooks last week. And FedEx (FDX, Fortune 500) raised its full-year profit target on Monday, citing a "continued moderate recovery in the global economy."

But many economists are still wary. Federal Reserve chairman Ben Bernanke rattled investors' nerves last week by saying in front of Congress that the recovery was "unusually uncertain."

This shouldn't be a surprise. It's overly simplistic to think that the economy is either going to roar back to life or is doomed to slip back into another recession -- especially when you consider just how painful the last downturn was.

For every strong earnings report, there seems to be an equally gloomy piece of economic data. Even good news, like the 24% jump in new home sales in June, is tempered by the fact that the rise is merely coming off a record low in May.

"This is a half-speed, half-hearted recovery. It's taking its time to unfold and is painfully slow," said Stuart Hoffman, chief economist with The PNC Financial Services Group in Pittsburgh. "We may move two steps forward and one step back for awhile."

Yes, it's frustrating to investors and consumers who want clarity about the economy and markets. We have to get used to it though.

Questions about the strength of the economy are likely to persist for some time. Yanick Desnoyers, assistant chief economist with National Bank Financial in Montreal titled a report about the U.S. economy last week "Recovery or relapse?"

In that report, Desnoyers indicated that rising profits for big companies in the United States is a positive, but that the chances of a double-dip "are not yet nil."

With that in mind, other experts said that people should expect the cloud of uncertainty to linger ... and for a long time to boot.

"The market is going to bounce around a lot. One day, we'll get excited about corporate earnings but then there may be overarching economic data that points to the recovery being a tough go," said Paul Nolte, managing director with Dearborn Partners, an investment firm based in Chicago.

Nolte said that the recovery from the Great Recession is likely to be muddled and take years. As the effects of stimulus from Washington starts to fade, the onus will be more on businesses and individuals to start spending again.

"What we're looking at now is a transition from a government supported economy to a recovery that hopefully will be sustained by consumers and corporations," Nolte said. "But we're getting a mixed picture and a lot of it has to do with debt. Companies have strong balance sheets but consumers still have a lot of debt."

Hoffman agreed, adding that until companies truly become more confident about the economy, they are unlikely to make a big push to hire people. He said he thinks the unemployment rate will slowly slip this year from its current level of 9.5% but that it is only likely to fall to just below 9% by the end of 2011.

That's obviously not welcome news to those looking for a job. Keep in mind that even though there was a long jobless recovery following the last recession in 2001, the peak unemployment rate after that downturn was just 6.3%.

That's why even though some economists think the economy hit bottom sometime in the summer of 2009, many consumers don't feel like that's the case.

"I think the recovery has been going on for a year but we're still debating whether or not it's a recovery. That speaks to the frailty of it," Hoffman said.

- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of, La Monica does not own positions in any individual stocks.  To top of page

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