Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

U.S. GDP Report Good for Main Street, Maybe Not for Wall Street

Stock-Markets / Financial Markets 2010 Oct 30, 2010 - 04:28 AM GMT

By: Sy_Harding


The long-awaited report on economic growth in the third quarter was released Friday morning, and was a somewhat pleasant surprise. After declining from an annualized growth rate of 5.0% in the fourth quarter of last year, Gross Domestic Product (GDP) growth declined to 3.7% in the first quarter of this year, and to just 1.7% in the second quarter.

It had many economists worried about a double-dip back into recession, especially after economic reports for July and August, the first two months of the third quarter, showed sharp declines in auto sales, home sales, and consumer and business confidence.

Some economists were projecting third quarter growth could be as low as 0.6%, and headed to negative growth (recession), although the consensus forecast was that GDP would be up 2.1% in the third quarter.

So, it was good news for the economy that the consensus got it right, with the report showing third quarter GDP improved to a 2.0% growth rate.

Equally good news within the report was that the growth was propelled by a 2.6% increase in consumer spending, since consumer spending accounts for 70% of the U.S. economy. Federal government spending also added to GDP, rising 8.8%, following a 9.1% increase in the second quarter.

In the other direction, the U.S. trade deficit continued to weigh on growth, as imports grew by 17.4% while exports rose only 5.0%. And corporate pessimism weighed on business spending.

Although still anemic and too slow to improve the employment picture to any degree, the news that the economy turned up some in the third quarter was good news for Main Street.

However, the news may not have been all that good for Wall Street.

As I noted in my column last weekend, the Fed seemed to panic after the stock market plunged in August in its worst August in years, as economic reports continued to worsen. The Fed seemed to give up on its prediction of only a temporary slowdown in growth in the summer months but not into recession, and then a return of growth in the second half and through next year.

In early September it was suddenly hinting at, and then virtually promising, a significant round of additional quantitative easing to rescue the economy.

As a result stock markets around the world began rallying off their late August lows, and produced the rarity of a substantial rally in September and October, historically the worst two months of the year.

However, now we have the report that GDP growth did not decline further in the third quarter, but improved, while recent economic indicators show retail sales, home sales, manufacturing, and consumer confidence have all ticked up, while unemployment claims have fallen for three straight weeks

So, as I suggested in my column last weekend, the Fed may now be wishing it had never mentioned quantitative easing, or virtually guaranteed markets a large program of easing, the extent of which it will announce after its FOMC meeting next Wednesday.

Global stock markets have factored in the substantial easing program that seemed to be promised, with projections that it could amount to a ‘shock and awe’ approach of as much as $1.5 trillion. That projection and the big stock market rally factoring the expectation into stock prices, has lifted not only the stock market, but investor sentiment, which is now at an extreme of optimism and complacency often associated with market tops.

So, the market has to worry that these economic reports that are good for the economy may not be so good for the stock market, if it results in the Fed disappointing next week by initiating only a token amount of quantitative easing to keep its promise on easing, and the stock market has to factor out the shock and awe easing it spent two months factoring in.

Looking out further however, the third year of the four-year presidential cycle, historically the most positive of the four years, is now but a couple of months away.

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