Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

U.S. Economy, Is This As Good As It Gets For Now?

Economics / US Economy Mar 03, 2012 - 05:58 AM GMT

By: Sy_Harding

Economics Best Financial Markets Analysis ArticleIn Europe, the euro-zone debt crisis has pretty much faded from headlines. The arrangements that will bail out Greece - at least for now - have been pretty much finalized. The European Central Bank has made two huge rounds of low cost 3-year loans available to European banks, and that seems to be working to assure that the eurozone financial system will be okay for several years.


In the U.S. the economic recovery has surprised with its strength since last fall, just about every economic report exceeding consensus forecasts.

In the stock market, the S&P 500 has gained a big 26% since its low on October 3.

It is true though that only those who got out of the market for its unfavorable season last summer, and then re-entered in October for the market’s traditional favorable season, have reaped meaningful gains from the rally.

For others, the rally was needed just to get the market back up to approximately where it was last April, almost no gain in ten months (and considerable pain in the summer correction).

In addition, most of the gains from the rally were made by those quick enough to see what was coming, with the S&P 500 gaining 13% from October 3 to November 3. Since then the gains have averaged only about 2% a month.

Interestingly, October was when the outlook seemed to be at its worst. The economy had stumbled badly in the first half of the year, and as the 2nd half began, economic reports coming in for July and August were even worse. Economists were frantically slashing their forecasts. In September, Goldman Sachs cut its forecast for GDP growth to 1% for the 3rd quarter and 1.5% for the 4th quarter, while JP Morgan Chase cut its growth projection to just 1.0% for the 4th quarter, and only 0.5% for the 1st quarter of 2012.

In Europe, the debt crisis had worsened again, with Greece warning in October that it could not come up with the degree of cost-cutting demanded by the IMF, EU, and ECB in order to receive the next payment on its bailout, which was needed by early November.

Yet, with those background conditions, and the Dow and S&P 500 down 20%, and investor fear high that the market was dropping into its next bear market, the market instead began to rally.

And now, the eurozone crisis has faded into the background. The U.S. economy is showing strength that is surprising most everyone. Economists, so gloomy last October, are now raising their forecasts. Investor sentiment, so bearish last October, is now bullish and confident the rally has further to go. Favorable seasonality, at least based on the ‘Sell in May and Go Away’ maxim, has another two months to run.

Shouldn’t the stock market rally be gaining momentum?

It isn’t. The Dow has made several additional new highs recently, but didn’t hold onto them, and is barely above its level of mid-February. The DJ Transportation Avg, which frequently leads the rest of the market, has possibly already rolled over into a correction, down 4% over the last four weeks. The popular small stock index, the Russell 2000, is in a similar situation, down more than 3% since early February.

So is the market saying this is as good as it’s going to get for a while?

It could be.

As hedge fund Comstock Partners noted this week in explaining its opinion that “downside risks are now far greater than upside potential again”, over the last 60 years household debt averaged 55% of GDP. It had surged up to an unsustainable 99% of GDP by 2008, as consumers borrowed and spent like never before. Households have been trying to pay off that record debt since the financial collapse. But they have a long way to go to get back to normal levels that would support spending at a pace needed for a sustained recovery, since the percentage of household debt to GDP is so far down only to 88%. Coupled with the still high level of unemployment, that does not bode well for consumer spending to pick up in any sustainable way just yet. And consumer spending accounts for 65% of GDP.

As if to support the concern that the economic recovery may stumble again, there have been a string of unexpected negative reports recently. Durable Goods Orders fell an unexpected 4.0% in January, after rising 3.2% in December. The national ISM Mfg Index unexpectedly declined in February, to 52.4 from 54.1 in January. Construction Spending unexpectedly slipped in January versus the consensus forecast of economists for another increase.

Meanwhile, in the eurozone, Greece and Italy no sooner seemed to be out of the woods when Spain warned Friday morning that it will miss the deficit targets it promised the EU for 2012.

Perhaps the market is worried that this will be as good as it gets for a while.

So, could the market’s favorable season perhaps end early this year? It’s happened before.

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

© 2012 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