Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

Stocks Bull Markets Generate Economic Growth

Stock-Markets / Financial Markets 2010 Jul 25, 2010 - 11:57 AM GMT

By: Nadeem_Walayat


Best Financial Markets Analysis ArticleThe UK economy is booming! 1.1% growth for Q2 2010 annualises to 4.4%. The academic economists that populate the mainstream press were caught off guard again! with growth expectations ranging from 0.3% to 0.5%. As is usually the case the excuses button was pressed to try and mask the fact that they to all intents and purposes remain clueless on the direction of UK Economy with much press chatter focused on an non existant double dip recession.

Actual growth for the first half of 2010 now totals 1.5% which is is line with my expectations for strong growth during 2010 that targets UK GDP +2.8% as per the GDP forecast of december 2009 (UK Economy GDP Growth Forecast 2010 and 2011, The Stealth Election Boom ). This compares against forecasts of the OECD, IMF, E.U., and CBI that had penciled in UK growth of just 1% for the whole of 2010.

As is usually the case, the press and academic economists remain permanently fixated on looking through the rear view mirror, writing reams and reams to explain what has already happened. Whilst their response to one of the greatest drivers for economic growth is to state that that the stock market is detached from reality. Yes I said DRIVER, not LEAD INDICATOR which is the consensus view that the stock market rises to discount future economic growth, which is not quite accurate, a rising stock market acts as a strong positive feed back loop that GENERATES economic growth, that GENERATES RISING Corporate Earnings.

This is why the vast majority of analysts that are fixated on valuations and corporate earnings conclude that stocks cannot rise because they are over valued by as much as 40%. When the reality is that the stock market TREND MANIFESTS the reality, as I pointed out in Mid March 2009 (Stealth Bull Market Follows Stocks Bear Market Bottom at Dow 6,470) whilst many prominent analysts were stating that stocks could not rise due to the fact that corporate earnings were expected to collapse.

The bottom line - The stock market as a whole does not FOLLOW or LEAD, it GENERATES economic activity. The same can be applied to other major asset classes such as the housing market. But there the mistake that analysts make is that they fail to recognise that asset classes cycle. I.e. For a number of years housing can be the economic growth generator, at other times it can be stocks. If you get both strongly trending well above inflation then you get a boom. Similarly if both are falling then the markets are going to GENERATE a recession.

The dark pools of capital understand this, the Fed understands this, now you have also joined that exclusive club. One could generate a formula based on the real terms change in total valuations of all publically held assets i.e. housing, stocks, savings and bonds to determine the net impact on the economy to create a future trend path for the economy.

Inflation Mega-trend - The stock market tail along with other asset classes wags the economic dog by means of the derivatives market that has increased by $150 trillion DURING the credit crisis which is why deflationists are wrong, as by focusing on contracting bank lending or the Fed's balance sheet they are merely looking at the ripples on the surface of an inflationary ocean. As the banks start to lend again there will be an accelerating flood of money that no central bank will be able to prevent the inflationary consequences of.

Stock Market Trend - The Dow fell to a low of 10,007, and put in the anticipated higher low in preparation for a break above resistance at 10,407 as indicated last weekend (Stocks Stealth Bull Market Correction Generating China Buying Opportunity? ), that occurred this week with the Dow closing at 10,425. The Dow continues to target a trend to 10,700 as per the last in depth analysis (16 May 2010 - Stocks Bull Market Hits Eurozone Debt Crisis Brick Wall, Forecast Into July 2010) as illustrated below, with the actual trend having shifted a few weeks to the right due to putting in a later low.

Perma bears have now gone silent after having been busted once more, a couple of months ago Nouriel Roubini was forecasting that the Dow would fall by 20% over the next few months (23 May 2010 - Nouriel Roubini Stock Market 20% Drop Forecast, Time to Buy?), instead the Dow is still trading higher than where it was when he made the forecast, which matches every stock forecast made by Roubini that has turned out to be wrong for the duration of this stocks bull market, with other prominent media star analysts not far behind.

An in depth update is now pending that will seek to map out a trend for the next few months that I aim to complete sometime during the next 2 weeks.

The trend pattern remains for a corrective trading range in preparation for a blast off towards a 2010 target of 12,000 to 12,500 as illustrated by the below graph from the Inflation Mega-Trend Ebook (FREE DOWNLOAD). The current action signals a market that is preparing to test the bull market high.

DOW Stock Market Forecast 2010

Gold - Gold had a stable week by closing a little higher on the week at 1,189. My expectations are for Gold to target 1,140 in advance of a break to new highs to target to $1333 later this year. However my last in depth gold analysis now dates back to November 2009, therefore now requires a major update.

European Bank Stress Tests

The E.U. published its fantasy land Bank stress tests on Friday, which are based on fantasy assumptions of VERY mild recessions of just -0.4% and no sovereign debt defaults despite the fact the recessions are usually 5 Times as severe as that which has been tested for and countries such as Greece are directly heading towards default within the next 2 years which effectively means that rather than 7 banks failing the stress test, a real stress test would have indicated at least 70 of the 91 banks would have failed the stress test.

The european politicians are desperate to persuade the markets that another banking crisis is not imminent, in the meantime they intend on immunising their banks against an inevitable sovereign debt default as now they know exactly what exposure the banks have to Greek, Spanish and Portuguese debt, so know how much potential losses would need to be covered by primarily German tax payers.

Comments and Source:

Your not too stressed analyst.

By Nadeem Walayat

Copyright © 2005-10 (Market Oracle Ltd). All rights reserved.

Featured Analysis of the Week

Metals Investing in Burkina Faso, The Land of Upright People - 25th July 10 - Richard_Mills
Obama Preparing to Attack Iran - 25th July 10 - Webster G. Tarpley
Thoughts on the Economy - 25th July 10 - Marcus Eduardo de Oliveira

Deflation Report

Wages and Subsistence - 24th July 10 - Ludwig von Mises
Elements of Deflation and the Super-Trend Puzzle - 24th July 10 - John_Mauldin
Gold Market Spooked by Deflationary Double-Dip Recession Fears - 23rd July 10 - David_Galland
The U.S. Econonomies Future
Oil Stocks XOI Undervalued - 23rd July 10 - Zeal_LLC
Gold Market Manipulation, Swaps Signal the Roadmap Ahead, BIS The Super SIV Solution - 23rd July 10 - Gordon_T_Long
U.S. House Price Forecast 2010 to 2015 - 23rd July 10 - Andrew_Butter
Buy and Sell Gold On-line Securely
Ponzi Shark Loans Fuel China's Housing Market Bubble That's Going Bust - 21st July 10 - Mike_Shedlock
ECRI Paranoid About Calling a Double Dip Recession - 20th July 10 - Mike_Shedlock
Problems of Investing in Asia, ETF's May Not be Winners for Structural Reasons - 20th July 10 - Louis Gave
Stock Market Crash Report - FREE
Investors Riding the High Volatility Waves Without Wipeouts - 19th July 10 - Rick Rule
72 Analysts Believe Gold Will Go Parabolic To Between $2,500 and $15,000! - 19th July 10 - Lorimer_Wilson
Welfare and Warfare, Paying the Price for the Baby Boomers Generation - 19th July 10 - James_Quinn
Get Your Free 50-Page Download: The Ultimate Technical Analysis Handbook
Consumer Confidence Collapsing, Economy Sinking Investor Profit Bonanzas - 19th July 10 - Martin D Weiss
Why Upbeat Corporate Earnings Reports Mean Caution For Stock Market Investors - 19th July 10 - Jon D. Markman
Time for UK to Quit U.S. Afghan War? - 18th July 10 - Andrew_Butter
Buy and Sell Gold On-line Securely

Most Popular Financial Markets Analysis of the Week :

1. China: The US Is "Insolvent and Faces Bankruptcy"

By: Jesse

The common thought amongst even reasonably educated and economically literate Americans is that China is 'stuck with US Treasuries' and has no choice, so it must perform within the status quo and do as the US wishes, or face a ruinous decline in their reserve holdings of US Treasuries.

Read Article

2. The Debt Supercycle Path to Profligacy and End Game

By: John_Mauldin

I have been writing about The End Game for some time now. And writing a book of the same title. Consequently, I have been thinking a lot about how the credit crisis evolved into the sovereign debt crisis, and how it all ends. Today we explore a few musings I have had of late, while we look at some very interesting research. What will a world look like as a variety of nations have to deal with the end of their Debt Supercycle. We'll jump right in with no "but first's" this week.

Read Article

3. 72 Analysts Believe Gold Will Go Parabolic To Between $2,500 and $15,000!

By: Lorimer_Wilson

Believe it or not but I have identified 72 economists, academics, gold analysts and market commentators who have developed sound rationale as to why gold could quite possibly go to a parabolic top of at least $2,500 an ounce to even as much as an unimaginable $15,000 before the bubble finally pops!

Read Article

The U.S. Econonomies Future

4. U.S. Treasury Bond Fraud and Debt Monetization

By: Jim_Willie_CB

A significant feature of fiat money systems is the privilege for the custodian to commit fraud, big fraud, gargantuan fraud, even counterfeit. Fannie Mae might function as the clearinghouse for numerous massive role programs with $trillion fraud behind each, hidden from view, especially since it was conveniently nationalized. Follow some other fraud schemes, right out in the open. Surely such recount only touches the surface, but these shenanigans are advanced forms of fraud. They are smoking guns of USTreasury fraud and counterfeit, with strong whiffs of monetization. Much more monetization is to come, fully endorsed and sanctioned. Other clever techniques are being used, given the Quantitative Easing has officially been halted.

Read Article

5. ECRI Paranoid About Calling a Double Dip Recession

By: Mike_Shedlock

Inquiring minds have been watching the ECRI's weekly leading index plunge nonstop since October of 2009. Moreover the WLI has been in negative territory for 6 consecutive weeks

Read Article

6. Welfare and Warfare, Paying the Price for the Baby Boomers Generation

By: James_Quinn

Most people in America associate the Democratic Party with spending on welfare programs and the Republican Party with spending on warfare. Until reading Niall Ferguson’s brilliant The Ascent of Money, I never realized that welfare and warfare have gone hand in hand for over a century. The immortal German warmonger Otto von Bismarck was the first politician to introduce social insurance legislation in the 1880s. His reasoning was not strictly humanitarian. According to Bismarck, “A man who has a pension for his old age is much easier to deal with than a man without that prospect.” Bismarck was a shrewd politician who realized that when you provide people something for nothing, they will vote for you.

Read Article

7. Stocks Stealth Bull Market Correction Generating China Buying Opportunity?

By: Nadeem_Walayat

China - You will no doubt have heard much about the start of the great chinese stocks bear market as the Shanghai SSEC index has fallen below 2,500 to currently stand at 2,424. In my opinion the whole trend off of the high is a correction and therefore represents a opportunity to buy at bargain prices.

Read Article

8. Consumer Confidence Collapsing, Economy Sinking Investor Profit Bonanzas

By: Martin_D_Weiss

Rarely are the signs of an economic downturn as clear as they are today — collapsing consumer confidence, sinking retail sales, another round of housing market troubles, and much more.

And even more rarely do we see the stock market defy those signs like it did through Thursday of last week — finally succumbing, however, on Friday with the Dow’s 261-point decline.

Read Article


How to Subscribe

Click here to register and get our FREE Newsletter

About: The Market Oracle Newsletter

The Market Oracle is a FREE Financial Markets Forecasting & Analysis Newsletter and online publication.
(c) 2005-2010 (Market Oracle Ltd) - The Market Oracle asserts copyright on all articles authored by our editorial team. Any and all information provided within this newsletter is for general information purposes only and Market Oracle do not warrant the accuracy, timeliness or suitability of any information provided in this newsletter. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We recommend that independent professional advice is obtained before you make any investment or trading decisions. ( Market Oracle Ltd , Registered in England and Wales, Company no 6387055. Registered office: 226 Darnall Road, Sheffield S9 5AN , UK )

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Amyn Nasser
26 Jul 10, 09:44

Hello Nadeem,

Hope this finds you well. I happened to find your newsletter by chance and now get your newsletter regularly and am always thrilled to read your outlook, and I love your boldness in explanation. I am curious as I am new to this and sometimes traders language takes a while to understand. Would you please do a Dollar update. There is a lot of chatter about the USD going lower and lower, yet with Elliott Waves I am getting an analysis that we are in a Wave 1 of an upside in the Dollar Index. From your last Market Oracle 25Jul10-Stocks Bull Markets Generate Economic Growth with the Dow headed towards 12000 that would mean that Dollar Index would go lower, USD lower, Oil up, CAD$ up, Gold up, Euro up, etc. I'd love to have your view on the USD in a newsletter or personally.

Looking forward. Thank you so much.


26 Jul 10, 09:51
Dolalr Analysis


I am backed up with analysis to complete, my focus is on the uk housing market that requires about another 20 pieces of analysis to arrive at a conclusion and ebook.

I want to analyse the dollar and gold, but don't have the time.



jonny singapore
27 Jul 10, 18:13
uk inflation, US deflation

Hi Nadeem. looking forward to that work. Nice idea that price growth above inflation drives housing mania.

Given money supply growth vanishing in the US can you still be bullish on the stock markets, particularly over there?

Is the UK deviating from the US give that their inflation is at 1% and falling, combined with more savings and worse housing market?

Its almost like money supply there could drag down stocks which could impact everyone else.


28 Jul 10, 09:16
GBP & Gold

Hello Nadeem

If you can I would much appreciate analysis of British Pound versus USD.

Will the rising Pound keep taking chunks out of my Gold?

Post Comment

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

6 Critical Money Making Rules