Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Is the Stock Market Saying the Economy Will Remain Strong?

Stock-Markets / Stock Markets 2010 Feb 26, 2010 - 04:46 PM GMT

By: Sy_Harding

Stock-Markets Best Financial Markets Analysis ArticleLast summer, worries that the serious global recession was going to wind up in a global depression were replaced with confidence the recession would soon end.

Global stimulus efforts began to work. Plunging home sales reversed to monthly sales gains. Job losses that had been exceeding 500,000 a month improved to only 150,000 jobs being lost monthly. Home prices began to improve. Consumer confidence began to rise. The steep decline in corporate earnings slowed its pace significantly.

You can usually depend on the stock market to provide advance notice regarding what’s going to happen in the economy. It usually tops out when everything is still looking great, and its corrections and bear markets usually end when everything is looking pretty terrible and scary. And sure enough, the oversold stock market had taken off on a tear in the spring, when conditions were at their worst and the future looked the most bleak, beginning to factor into stock prices that the recession would not worsen, but instead would soon end.

Once again the stock market was right. In the third quarter, six months after the big stock market rally began, the recession ended. After four straight quarterly declines, GDP grew 2.2% in the third quarter. Last month it was reported that GDP surged up 5.7% in the fourth quarter, the fastest quarterly growth in six years. And on Friday, fourth quarter GDP was revised even higher, to 5.9% growth.

But with its weakness beginning in January just as those positive GDP numbers were released, and so far this year, is the stock market providing another warning about the economy, that this is as good as it’s going to get, or is it just a normal ‘buy the dips’ pullback?

Global stock markets have certainly been losing their upside momentum, some for several months. The Vanguard European etf, which tracks with European markets, is down 15%. Stock markets in the strongest global economies, China and India, are down 12% and 8% respectively. Japan, the 3rd largest economy in the world, sees its stock market down 8%. Mutual funds tracking emerging markets are down 10%.

Only in the U.S. does there seem to be few worries, at least as measured by the stock market, where both the conservative Dow and the speculative Nasdaq are down only 3.7%.

The nervousness in global markets is understandable. After all, there was the surprise report from Europe several weeks ago that GDP growth in the 16 Eurozone countries slowed to being up only 0.1% in the fourth quarter, as close to zero as you can get. That raises concerns that Europe may already be slipping back into recession. That worry was not lessened any by subsequent reports that the German Business Confidence Index fell in January for the first time since last April, and the well publicized reports of serious debt problems in Greece, Italy, Spain, Portugal, and Ireland.

No less worrisome have been the several announcements by China that it is making fiscal and regulatory moves to deliberately cool off its overheated economy, on which many countries have been pinning their hopes for continued export sales.

But is a positive outlook for the U.S. economy that much more assured?

After all, two weeks ago the bi-partisan Congressional Oversight Panel released a report saying that 2,988 U.S. banks, almost 40% of the 8,000 banks in the U.S., are about to “get hit by a tidal wave of commercial-real estate loan failures.” There was also this week’s report that the Consumer Confidence Index unexpectedly fell off a cliff, falling from 56.5 in January to just 46 in February. (Consumer spending accounts for 70% of the spending that drives the economy.).

This week it was also reported that new home sales unexpectedly plunged 11.2% in January, to the lowest level since at least 1963, and existing home sales declined 7.2%, the second straight unexpected monthly decline. Economists had expected both numbers to show increases, since the government program of sizable rebates to home-buyers is still in effect.

Adding to the concerns, apparently both inside and outside of the Federal Reserve, is what will happen to the housing industry, so important to the economic recovery, when the refunds to home-buyers program ends in April, along with the announced end of the Fed’s year-long massive purchases of $1.2 trillion of mortgage-backed securities, which has been very successful in lowering mortgage rates from 6% to 5%.

It seems like U.S. and global economies are slowing again, and that it will worsen.

But here’s something to consider.

Economists have been positive for several months that economic growth in the U.S. will slow over coming quarters, with some predicting it will slow all the way into a double-dip recession. They correctly forecasted strong fourth quarter GDP growth, but also correctly said it would be mostly due to the temporary rebuilding of business inventories, and government stimulus spending, which would not be sustainable.

But the stock market has a better track record than economists, and is usually well ahead of the curve, predicting economic changes six to nine months in advance. Yet it has not fallen in anticipation of a serious slowdown, at least not yet.

Could it be that economists, although seeming to have it right so far, have got it wrong, and that by being so resilient even in the face of the pile-up of negative economic worries, that the stock market is saying the economy will fool everyone by remaining strong through the year?

Just a thought.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website, and the free daily market blog,

© 2010 Copyright Sy Harding- 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

6 Critical Money Making Rules