Best of the Week
Most Popular
1.North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - Nadeem_Walayat
2.Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - OilPrice_Com
3.Gold and Silver : The Battle for Control - Rambus_Chartology
4.Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - Nadeem_Walayat
5.Deep State Conspiracy or Chaos - James_Quinn
6.The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - Plunger
7.Gold Stocks Coiled Spring - Zeal_LLC
8.Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - John_Mauldin
9.Crude Oil Price Precious Metals Link in August - Nadia_Simmons
10.Gold and Silver Precious Metals Nearing Breakout - Jordan_Roy_Byrne
Last 7 days
4 Reasons European Stocks Will Make a Big Comeback This Year - 22nd Aug 17
3 Lesser-Known Charts Revealing a Massive Stock Market Disconnect - 22nd Aug 17
U.S. Treasury Secretary: "I Assume Fort Knox Gold Is Still There" - 22nd Aug 17
Is the Stock Market Setting itself up for a Spectacular Crash? - 22nd Aug 17
Power Elites Launches Civil War Against Trump - 22nd Aug 17
The Stock Market No Longer Cares About Trump - 21st Aug 17
The Coming Boom Of Productivity Will Get Our Economy Back On Track - 21st Aug 17
Buffett Sees Stock Market Crash Coming? His Cash Speaks Louder Than Words - 21st Aug 17
This Could Be The Biggest Gold Discovery In History - 21st Aug 17
Stock Market Correction in Full Swing - 21st Aug 17
Seeking Confirmations – US Stock Market - 21st Aug 17
The changing demographic of online gamblers - 21st Aug 17
Gold is a coiled spring… the breakout is here, fundamentals are in place, technicals are compelling - 20th Aug 17
A Midsummer Night's Dream: Buy Gold and Silver - 20th Aug 17
Gold Mining Stocks 2017 Fundamentals - 20th Aug 17
EIA Weekly Report and Crude Oil - 19th Aug 17
4 Insights for Adjusting Your Portfolio in a Rate-hike Environment - 19th Aug 17
Gold Direction Indicator - 19th Aug 17
Historical Inevitability and Gold and Silver Ownership - 19th Aug 17
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Nolte Notes - If the US Economy is slowing why is the Stock Market Rising?

Stock-Markets / US Stock Markets Apr 30, 2007 - 12:45 PM GMT

By: Paul_J_Nolte

Stock-Markets

The biggest question of the week is: if the economy is doing so poorly, why is the stock market cheering? Based upon the GDP report, economic growth in the US is a measly 1.3%, way below what even the most pessimistic economists believed. As with any bit of bad news, there is always a silver lining – and here the blame rests firmly upon the housing slump. Next week we get the “big” economic reports that tend to move markets: employment and purchasing managers reports (ISM data).

Either these reports will confirm the GDP report or they will point to a one-quarter wonder and investors will continue to cheer stocks higher. The current guess (as good as it gets in this business!) is that payrolls will grow by roughly 100,000 with a fairly wide range around that figure.


The new focus will be on inflationary components to the employment report, as the GDP report showed prices rising at still uncomfortable rates. So the Fed continues to balance between higher than desired inflation and below the full potential of the economy – a spot the economy was in during the bad old days of the 1970's. However, any comparison between today's lackluster growth and modestly higher inflation and the rampant inflationary figures of 30 years ago would be erroneous – save for the ties to the energy markets. Housing will continue to play a key roll in the economy and its future over the next few years.

If the markets can rise on Monday, the Dow would have increased in all but two trading days for the month – a terrific feat. However, there were nine days in which there were more stocks that actually fell in price than rose – masking the strength of the Dow. What makes this “record” more interesting is if the volume were ranked from highest volume days during April to lowest, of the top eight volume days, six were when the declining stocks were higher than those that advanced. Among the slowest eight days, only three were on “down” days. In fact, of the 80 trading days so far this year, six of the top ten volume days came when more stocks declined and the slowest ten days saw only three.

We have argued for some time that the markets are not acting “bullish” – even though they continue to rise. Top it off with a bit higher interest rates than yearend, bullish sentiment among investors and valuations that remain among the highest in history and we are left wondering how much gas is still left in the market's tank. While we are not yet prepared to sell it all and hit the beach for the summer, we will be watching for additional cracks that may force us to take portfolios to higher (and safer) ground.

In the face of rather bearish news regarding inflation (still too high), bonds have acted rather well falling modestly over the past week. The bond model remains in bullish territory, indicating that rates could actually fall in the weeks ahead. The CRB index, the final arbiter of things inflationary (gold, oil and various industrial materials) is actually modestly lower over the past five months, reflecting the lack of huge demand for that basket of goods. While oil prices continue to rise, putting a large dent in consumer's wallets, it may also cause overall spending to slow as less left over once the tank is full to spend on other goods – so watch what the retail companies say about sales in the weeks ahead.

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.


© 2005-2017 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

Catching a Falling Financial Knife