Land Mines Pockmark Road to Recovery

Our old pal Mark Gongloff is one of the best financial writers in the biz. Here he get's the color crayons out and illustrates a childrens classic.
From the Wall Street Journal:

The stock market has erased almost all its losses for the year, yields on long-term government debt have returned to something like normal, and commodity prices have been surging -- all evidence that the worst of the economic crisis may have passed.

But the road to recovery is far from smooth, or even assured. As investors ponder their next moves in this unusually unpredictable cycle, they are confronted with a confounding array of potential risks.

Last Friday, they got a taste. The government's announcement of the lowest job-loss numbers since September didn't much faze the stock market. But the market for U.S. Treasury debt had its worst day in nine months, driven by worries about inflation and higher interest rates.

In today's jittery markets, good news on one front can have surprisingly bad effects elsewhere. At stake is the fragile confidence that's been restored in the financial system.

A jump in economic growth, for example, could send commodity prices sharply higher. On Friday, oil briefly traded above $70 a barrel, due partly to economic optimism. Worries about inflation would cause interest rates to rise, hurting the housing market. Higher commodity prices could also be a drag on economic recovery, pushing job losses higher and leading to more mortgage defaults....MORE

HT: The Big Picture