Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Watch for the Stock Market Pullback

Stock-Markets / Stock Index Trading Aug 09, 2009 - 12:02 PM GMT

By: Peter_Navarro

Stock-Markets

The US stock market continues in a decisively bullish uptrend on the basis of an improving economy. The consensus -- often a dangerous thing but probably right this time -- is that the economy has hit bottom; and numerous indicators suggest that it is on an upward swing.


The most important short to medium-term driver of economic growth -- and this bull market -- is business inventories. They are as lean as they ever get, and the thinking is that as manufacturers up their production to restock warehouses and shelves, an investment led stimulus will provide the next leg in the upturn, which has been triggered, at least in part by the fiscal stimulus. That this is clearheaded thinking is evident in one of my favorite of leading economic indicators: the ISM Manufacturing index. The chart below clearly indicates a strong upward trend after the index bottomed last December.


For the foreseeable future, there should be relatively clear trading skies ahead. The big very short-term danger is a pullback as some traders take some profits and other traders reassess whether this recovery is for real.

The longer-term danger, which could begin to manifest in just a matter of months, has to do with a variety of negative forces bearing down on the US economy.

One force is government policy. I'm all for healthcare reform, but the wasteful garbage working its way through Congress under pressure from the president would add a significant layer of costs onto an already fragile private sector and a loaded-with-debt public-sector.
A second negative force is all money washing through the economy from the various fiscal and monetary stimuli. This genie is out of the bottle no matter what reassurances we get from the Fed about exit strategies. The inevitable result must be a declining dollar, rising inflation, and another likely commodity and energy bubble -- and of course contractionary Fed rate hikes.

Still a third negative force is the employment situation. The markets rose last week not because this economy is generating jobs but rather because the pace of job losses slowing. This is a misplaced optimism if you look at the chessboard properly. In order to have long-term job growth recovery, the US has to have a stronger manufacturing base. This issue has not been dealt with by the Obama administration, and it is the single greatest obstacle to long-term prosperity in this country.

As a final comment, as I was watching the president give a speech in Elkhart, Indiana last week, I didn't know whether to laugh or cry when the president made his claim that it would be education that would get us out of this whole mess. The president was absolutely correct, of course, that we need to teach our children well if they are to compete in the coming decades. However, here in California, all I see is massive budget cuts, teacher cutbacks, contracting school programs, and the descent further into mediocrity not just at the K-12 system but also at the university level where I teach. My fear is that the kids that are in high school and college now will be a lost generation, robbed of a high quality education and facing few prospects in the economy. We will see how that plays out, but Obama is not going to be the "education president" any more than Bush was unless he deals with the basic reality of America's declining manufacturing base and the desperate need for trade reform.

On the need for reform, see the new book by the Alliance for American Manufacturing climbing up the charts on Amazon -- I have a chapter in that book along with others like Clyde Prestowitz. It's a pretty good overview both of the problems we face and possible solutions. If you buy the book, please read it carefully, send your congressman a letter or e-mail about the importance of manufacturing in America, and then forward your copy of the book to the White House.

Navarro on TheStreet.com

Click here to review my videos on TheStreet.com.  

———- Peter Navarro is the author of the best-selling The Coming China Wars, the path-breaking The Well-Timed Strategy, and the investment classic If It's Raining In Brazil, Buy Starbucks. Peter’s latest book is Always a Winner: Managing for Competitive Advantage in an Up and Down Economy. Peter is a regular CNBC contributor and has been featured on 60 Minutes.  His internationally recognized expertise lies in his "big picture" application of a highly sophisticated but easily accessible macroeconomic analysis of the business cycle and stock market cycle for corporate executives and investors. He is a Professor at the Merage School of Business, University of California-Irvine and received his Ph.D. in economics from Harvard University. Professor Navarro’s articles have appeared in a wide range of publications, from Business Week, the Los Angeles Times, New York Times and Wall Street Journal to the Harvard Business Review, the MIT Sloan Management Review, and the Journal of Business. His free weekly newsletter is published at www.PeterNavarro.com.

© 2009 Copyright Peter Navarro - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules