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
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

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