Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Contrary to Opinion, US is Not In a Recession Yet

Economics / US Economy Sep 10, 2007 - 12:47 PM GMT

By: Paul_J_Nolte

Economics First it was if, then it became when and now it is how much. The very weak jobs report on Friday moved the Fed to front and center in the debate on economic growth and how aggressive should the Fed be in cutting interest rates to save a faltering economy. While a negative reading on “job creation” does not necessarily mean we are entering a recession, the likelihood of one has increased. However, other economic reports last week were not as dire, as the consumer seemed content to spend, judging by the retail sales figures provided by the various retail companies.


The now usual poor comment from the real estate market were also made last week and guesses as to when the mess may abate range from later this year to sometime in 2010. The surprisingly poor jobs report puts added emphasis on the reports this week, including trade (are foreign economies still strong enough for us to sell to?), business inventories and production (has our economy slowed to force stockpiles of “stuff”?) and the governments reading of retail sales. In one week, one economic report created an immediate sense of economic urgency that didn't exist seven days ago. We now look for confirmation from other reports before we really worry.

Vacations are supposed to be over and traders are supposed to be trading and volume is supposed to expand back to what passes for normal. However even with Friday's big decline, volume continues at a very slow pace. Certainly the market “internals” (number of rising/falling stocks amount of volume going into each etc) were poor and indicate that the market may be embarking upon its much-anticipated retest of the lows made August 16 th . The weekly data supports additional market weakness ahead and just maybe both the longer and short-term data will coincide with a neat market bottom sometime later this month or October – when the markets are supposed to bottom. The possibility still exists, however, that the markets “fail” the test and continue to drop. That will be confirmation that a new bear market cycle is upon us and we could easily see a 10-15% drop from the prior lows before it would be OK to step back into the market. This scenario would line up with a recession that would be occurring is mid-2008 and ahead of the beneficial effects of the rate cuts the Fed will likely be making to re-energize the economy. 

Persistent weakness in the utility averages and strength in the commodity complex has kept the bond model from registering a positive reading over the past couple of weeks. Yields have moved lower across the curve, as investors begin betting on multiple interest rate cuts by the Fed to keep the economy on decent footing. After hitting 5.25% on the fourth of July, the long-bond has rallied in price to cut the yields to 4.7% on Friday. Over the past six weeks short-term rates have declined by one-half percent as well, keeping the overall yield curve relatively flat. Based upon the employment figures last week, investors are figuring on either a pre-emptive rate cut or a 50 basis point cut at their September meeting. We are figuring on the usual 25 basis point cut, as only once in the Fed's history (2001) have they started a rate cutting cycle with anything more than a quarter point cut.

By Paul J. Nolte CFA
http://www.hinsdaleassociates.com
mailto:pnolte@hinsdaleassociates.com

Copyright © 2007 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

© 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