Up to now, analyst consensus has been for 3% US growth in the second half of 2010. My expectation has been for much less. I believe that positive growth of any kind would be a best case scenario over the next couple of quarters. But even this best case scenario is likely to further disappoint stock markets in the weeks ahead. Negative growth is likely to spark a renewed wave of outright panic in global markets.
An indicator which accurately forecast growth in Q2 at 2.6% (it came in at 2.7 final last week) is the Consumer Metrics Institute's Daily Growth Index. This index is now projecting negative growth of -1.5% and -2.0% over the next two quarters. You can read more here with Larry Doyle.
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I'm using ECRI data as a primary strategic investing tool in a last 10 years, and it's working like a charm. After careful examination perhaps in the future I'll add CMI's DGI to my toolbelt as long it's confirming the first one. Just simply locking out the noise.
The perfect tool for the job would be ECRI USLLI and their Professional Services but to subscribe to it is prohibitively expensive.
I think it's coincidental that started out using a PMI as an early indicator, find it useless and ended up with ECRI, just like D. Rosenberg. Weird.
Anyway, here in Vancouver business feels like we are in depression already……….
I'm looking at the NACM index for June, and it's consistent with the CMI's DGI , but not before June. Nevertheless, the credit index is falling big time since May, ergo the consumer does not want or able to pick up the baton from the inventory re-builders. Ditto here on the West Coast. People are tight with their money, like the fish's backside. Water tight.
Danielle, in your opinion, what level on the S/P 500 would be fair with the 0% real GDP growth in the coming 4th quarter? Or, what % chance do you see to re-test the '09 March lows in case the yanks dip below and no more stimulus left?
Dow-Theory Sell Signal.
It’s official now that the venerable Dow-Theory triggered a sell signal this week. Basically the theory is that the Dow Industrials (DJIA), and DJ Transportation Avg must make new highs reasonably close together for the market to remain in a bull market. When one rolls over to the downside in a negative divergence and/or they begin making new lows together, it’s a sell signal. And on Wednesday both closed below their June lows, triggering the sell signal.
Educated guessing is all we have unfortunately, so no one can say for sure. Our guess would look for support next in the 920 range for the S&P and that seems likely in a 0% -1% GDP growth story. Technically it appears that we may now be on the downside of a massive head and shoulders top on all kinds of risk markets simultaneously around the globe. If that holds then we are likely headed considerably below 920, I think that scenario is probably greater than 50%, especially if growth dips below zero for a quarter or two, and would bring the November 2008 and then March 2009 lows back into view for a downside test in the next contraction leg of our secular bear. Remember secular bears repeatedly retest the prior cycle low, its just a question of whether it does this again now or a couple of years from now.
One opinion on fair value for S&P
http://www.zerohedge.com/article/multiples-myth
Insights from Graham Summers
http://seekingalpha.com/article/212634-is-this-a-confident-market
“Funny stuff” in the gold markets
http://jessescrossroadscafe.blogspot.com/2010/07/imf-engaged-in-gold-swaps-to-about-380.html
Slightly-less-treacly Buffett-related news hitting the Street today, Berkshire Hathaway was cut to “sell” at Stifel Nicolaus. A team of analysts led by Meyer Shields told clients, rather hilariously, that Berkshire is facing a “blah-shaped recovery.”
“Declining consumer confidence will slow consumer spending, as employment very slowly recovers,” wrote the analysts. “Our weak macroeconomic outlook implies poor second-half 2010 earnings.”
Computerized stock trading leaves investors vulnerable
http://www.usatoday.com/money/markets/2010-07-09-wallstreetmachine08_CV_N.htm