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

Can The U.S. Economic Recovery Overcome Europe’s Drag?

Economics / Economic Recovery Jan 07, 2012 - 07:18 AM GMT

By: Sy_Harding

Economics Best Financial Markets Analysis ArticleIn an October column I wrote, “For the first time this year the trend of U.S. economic reports is potentially bottoming and turning positive. And after being bearish in the spring and summer, I like what I see in the technical charts of many markets. If only we could ignore Europe.”

That pretty much still defines the situation as we enter the new year.


Our indicators did trigger a buy signal in mid-October, and the Dow is up 16.5% from its early October low.

The U.S. economic recovery did indeed get underway, and has been gaining momentum impressively.

More importantly, the positive reports are coming from all the crucial segments of the economy; consumer confidence, home sales, new home construction, the auto industry, manufacturing, the services sector, and even more impressive, in the employment picture.

This week’s reports continued the trend. They included that construction spending was up again in November, its third monthly increase in four months, rising 1.2% versus the consensus forecast of only a 0.5% gain. Near record low mortgage rates and rising home sales are encouraging home-builders. Private construction spending is at its highest level in more than two years. Of course, that’s not saying a lot since it’s still in a deep hole. But the four-month trend reversal is encouraging.

It was also reported this week that Factory Orders rose 1.8% in November, which no doubt contributed to the report that the ISM Mfg Index rose again in December, to 53.9, its highest level in six months. Within the ISM report, new orders also rose in December, which had companies boosting production and employment.

And that no doubt contributed to both the ADP jobs report on Wednesday, and the Labor Department’s employment report on Friday, which showed a big increase in the number of new jobs created in December. The Labor Department report was that 200,000 new jobs were created versus the consensus forecast of 150,000. And the unemployment rate fell for the fourth straight month, to 8.5% in December from 8.7% in November, 9.0% in October, and 9.1% in September.

However, I don’t want to be misleading with my optimism since October.

It’s not a time for buy and hold investing, still a time to go after intermediate-term rallies with willingness to take profits at some point and re-position for periodic corrections. The volatility will continue.

It seems clear the U.S. economy is still on the mend since the ‘Great Recession’ ended in June, 2009, and the slowdowns in the first half of 2010 and again in the first half of last year were only temporary pauses in the recovery.

But while the recovery remains on course it is still anemic, still not producing jobs fast enough, still not cutting into the glut of unsold homes fast enough, still not strong enough to have corporations using their record hoard of cash for investment and expansion, still not on sure enough footing to assure banks they can lend in confidence of being paid back (instead of seeing the loans become more bad debts on their books down the road).

There was horrendous damage done in the Great Recession of 2007-2009, and the economy could not possibly bounce back from that much damage as fast as from previous recessions. It will take more time, and involve more hiccups along the way.

For instance, there are the record U.S. federal budget deficits and debt, which will have to be taken care of sometime down the road, perhaps painfully for the economy and therefore the stock market. A continuing economic recovery can kick those worries down the road into next year or even beyond.

But unfortunately, that’s still conditioned on ‘if only we could ignore Europe’.

It’s no longer a question of whether the U.S. economy can recover from the first half slowdown on its own without the Fed providing further economic stimulus. It’s proving that it can, and is.

Now the question is whether the momentum of the recovery can continue if the eurozone debt crisis and potential for Europe to slide into a recession remain in the headlines.

In that regard, the market’s muted response Thursday and Friday to the continuing positive economic reports was a disappointment.

For years I have referred to the monthly jobs report as ‘the big one’ because it is anticipated with such intensity, has a record for most often coming in with a surprise in one direction or the other, and for those surprises to almost always result in a big triple-digit move by the Dow in the direction of the surprise.

That the market ignored Friday’s surprisingly positive jobs report, and instead focused on the news that the yield on Italy’s 10-year bonds surged back up above the danger zone of 7%, was a reminder of the continuing influence of Europe’s problems on the U.S. market, in spite of the impressive economic recovery underway in the U.S.

For now I’m giving the benefit of the doubt to the U.S. economy, expecting it will win out as the dominant factor.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2011 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 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