The proverbial dead horse is starting to show some surprising signs of life. Tom Sowanick is CIO of Clearbrook Research, part of Clearbrook Financial, a Princeton, N.J.-based wealth-management service provider.

The view that the financial sector is in a state of long-term (if not permanent) decline is entrenched. So it's easier to dismiss subtle signs of positive change as aberrations rather than take them on face value.

What, for example, should we make of the University of Michigan's Consumer Sentiment Index rising by more than 8% month-over month? How about new-home sales coming in 5.4% higher than the consensus estimate? Or that May home sales were revised up by 4% from the initial report?

These good signs shouldn't be read to mean that the storm has passed, but we are starting to move in the right direction.

The capital markets are beginning to work again -- after nearly a year of accumulating woes. Private-equity firm Kohlberg Kravis Roberts is finally going public, more than a year since venture player Blackstone went public at $31 a share (it now trades at around $17 a share now.)

Y2Carbon

The dollar is 12% weaker than it was a year ago. Its debility will continue to support US export sectors, such as steel makers, coal producers, and shipping companies.

UPS, which controls 51% of the U.S. package and delivery market, said last week that "the second half of 2008 will generate modestly better results than the first of the year." In other words, as I read it, UPS believes the real economy will avoid a recession, and that the worst is behind us.

New legislation Congress passed last week lets the Federal Housing Administration guarantee new loans for 400,000 homeowners after lenders reduce their unpaid balances. As a result, Bank of America says it expects "to see an increase in the number of homebuyers who are seeking FHA financing to purchase a home, and that will be a benefit to us."

So, with a weak dollar and stimulus flowing in from the Federal Reserve, the Treasury Department, Congress, the real surprise for 2009 could be an economy that skyrockets.

A similar scenario played out from late 1999 as the U.S. prepared for the unknown effects of the Y2K computer glitch. During this period, U.S. GDP expanded sequentially: 4.8% (Q3 1999), 7.3% (Q4 1999), 1% (Q1 2000), and 6.4% (Q2 2000).

Similarly, high oil prices may have initiated a wave of creative destruction where old high-carbon-footprint industries are re-tooled or replaced with new industries.

A bright example is the unwinding of the legacy car manufacturers in the U.S., replaced by alternative-energy vehicles. The need to become green will continue to spawn new industries, jobs, and economic growth.

Financial market dislocations have created spectacular values in many sectors, but the financials may prove to be the best long-term offering in this market. -FWR

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