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TREECE BLOG
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september 4, 2011
Markets rally as recession looms
uring the past several weeks, stocks have staged a mild recovery following their violent correction. While this has led many investors to re-enter the markets, unfortunately these bounces appear totally unfounded. Most are simply traders taking advantage and buying on dips, but these moves are based totally on technical indicators and market internals — not economics. The market has seen modest bounces simply because data being released isn’t as bad as expected. Sadly, this doesn’t make the data good. The Chicago Purchasing Managers Index, or PMI, released Aug. 31, fell, but the decline was less than expected so stocks bounced. Similarly, the ADP Employment report, also released Aug. 31, showed that the private sector added roughly 91,000 jobs in August, not quite the anticipated 100,000. Plus, the number of jobs added in July was revised to 109,000 from 114,000. Neither of these figures reflect positively for the economy, particularly not when other, more dreary data is considered. Chief among this more pessimistic data is growth in Gross Domestic Product (GDP) or, more accurately, lack thereof, which recently dipped below 2 percent on a year-over-year basis. This is a point that has been repeatedly hammered by a select few financial pundits who are aware that
every time U.S. GDP growth has saying for four years that he wanted slipped below the 2 percent mark, to see an uptick in inflation in order the country has entered a recession in to get the economy going. So far he has failed to achieve higher inflation short order. As many readers will note, we or put it to work jumpstarting the U.S. economy. So what had been anticipating makes him think it will this development for work now? some time, just as we As the market reacts have been anticipating to new data and tries to another U.S. recession. keep its footing without Now these predictions the support of the Fed’s are coming to fruition. quantitative easing proIn fact, we would grams, investors have argue right now that plenty of reason to look the United States is alforward. First, there’s the ready in recession, and that this will be reflected Dock David TREECE Obama jobs plan, which the markets have been eain economic data that will be released — and revised — gerly awaiting for weeks. Plus, Congress is about to resume session after a nice in the future. For those looking to the Federal vacation. Finally, we’re looking at a posReserve for help, we’ve written before sible reversal of some key court rulings and will reiterate here that neither the on issues involving the National Labor economy nor the markets will get any Relations Board, the EPA and others. While many of these — the court support from the Fed. The latest minutes from the Fed show an increas- decisions, the jobs plan and any change in Congressional policy after its break ingly divided Board of Governors. While the Fed would never admit it, — may be fundamentally good for it is essentially out of ammunition when America’s business community, they it comes to lending support to the mar- may very well still weigh on markets. kets or the business community. It pulls After all, as we’ve written time and the trigger and we can hear the “click” again, markets hate uncertainty and from here. Now Ben Bernanke’s Fed is these developments only introduce talking about setting target levels for more doubt about the role of governinflation and unemployment, which ment in business going forward. O echoes back to the misery index that Dock David Treece is a discretionary Reagan used to defeat Carter in 1980. Oddly enough, Bernanke has been money manager with Treece Invest-
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ment Advisory Corp (www.Treece Investments.com) and is licensed with FINRA through Treece Financial Services Corp. He has appeared on CNBC and numerous radio programs, and also serves as editor of financial
news site Green Faucet (www.GreenFaucet.com). The above information is the express opinion of Dock David Treece and should not be construed as investment advice or used without outside verification.
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