Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Watch for the Stock Market Pullback

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

By: Peter_Navarro


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

Click here to review my videos on  

———- 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

© 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 - 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