Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Don’t Give Up on U.S. Stocks Just Yet

Stock-Markets / Stock Markets 2010 Jun 23, 2010 - 05:56 AM GMT

By: Money_Morning

Stock-Markets

Jon D. Markman writes: There's no denying that bearish investors have made their case in recent weeks. They are legitimately afraid that the economies of the United States and Europe will fade so much in the next few months that they will sink back into recessions punctuated by credit blowups and a resumption of a bear market for U.S. stocks.


Still, the simple fact that there are a few economic boogey-men lurking behind each suspect piece of data doesn't mean that investors should run screaming away from stocks.

In fact, if you take the time to listen to the opposite point of view before you make up your mind about the direction the economy is headed, you might be pleasantly surprised.

Consider, for instance, that Morgan Stanley (NYSE: MS) analyst Richard Berner - who has been around the block a few times - says his models suggest that the pace of economic growth will actually quicken in coming months.

In his words: "Incoming data portray a robust economy, an acceleration from a 3% pace of growth in Q1 to a 4% annual clip in Q2 even as consumer spending decelerates...And we continue to expect 3.5% overall growth in the second half of this year."

Berner, who is the co-head of global economics and chief U.S. economist at Morgan Stanley, cites three factors for this bullish outlook:

•First, is strong global demand, which can be seen in the record level of export orders in purchasing manager surveys as well as economic data from overseas. The ISM export orders' diffusion index, which weighs the percentage of manufacturing executives forecasting strength versus the ones forecasting weakness, is at its best level since 1988. In Brazil, consumption is up 9.3% year-over-year. In Canada, wages up are 2.4% from a year ago. Korean raw material imports rose 91% in May.
•Second is rising U.S. income growth. Berner estimates that hours worked (which closely tracks income growth) rose at a 3.75% annual rate in Q2 - the best result since early 2006. Overall, he is looking for average monthly payroll gains of 200,000 per month through the rest of the year.
•The third, and final, factor is the lingering impact of the stimulus package, including hotly debated infrastructure projects. The March-April 2010 data for state and local construction outlays show that federal spending has finally overwhelmed local construction cutbacks. Berner's team estimates that construction spending is increasing at an 18% annual rate in the current quarter, following two quarters in which spending dropped at a 13% annual rate.

So while there's no doubt the global economy continues to face challenges from the sovereign debt issues and the lingering concerns over the housing market and consumer credit, there is measurable strength.

Plus, don't forget that the whole European mess will provide two big tailwinds to American consumers: Cheaper gasoline prices - thanks to a stronger dollar - and lower mortgages rates - thanks to a rise in demand of Treasury bonds.

If that's not enough to make you feel better, here are a few final pluses:

Household net worth rose by 2.1% in the first three months of this year to $54.6 trillion. That marked the fourth consecutive quarter that Americans' wealth grew. It's worth noting that during the recession, which began in December 2007, household net worth plunged as low as $48.3 trillion in the first quarter of 2009.

Meanwhile, gasoline prices are expected to drop 4.5% this month from last month, keeping inflation at bay.

The bottom line: Overall economic and corporate growth may be set to slow, but not to levels that are disastrous, or even likely to imperil the stock market - at least not yet.

So, continue to fade the pessimism while it persists, but keep an eye out for an overabundance of optimism if we get to the top of the range at the 1,150 level of the Standard & Poor's 500 Index, or if bears get the upper hand and manage to push the benchmark index under 1,040.

Source: http://moneymorning.com/2010/06/23/u.s.-stocks-6/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 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