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Recession Creates a Vicious Cycle |
July 9, 2008 By Jon Markman, Editor, Trader's Advantage |
Jon Markman
Jon Markman, a veteran money manager and award-winning journalist, is editor and founder of the investment research newsletter Trader's Advantage. A pioneer in the development of stock-rating systems and screening software, Markman is a co-inventor on two Microsoft patents and author of the best-selling books "Swing Trading" and "Online Investing."
…six consecutive months of job losses—something that's never happened outside a recession, says Dunne.
Whatever inflationary pressures there are, they're not coming from the job market.
And with more Americans out of work, Europe slowing and Asia taking its own set of hits—with the Indian and Chinese stock markets cut in half this year—you just have to imagine commodity prices will begin to suffer as demand sinks and marginal new sources of supply emerge.
What Else Do We Know?
So what else do we know about the economy besides the softness in jobs?
Here are a few items gleaned from government and private industry data in the past week:
- Domestic vehicle sales in June were the weakest since at least 1991. General Motors (GM) shares fell to their lowest level since the mid-1950s.
- Thomson Financial reports that estimated growth rate for Q2 2008 stands at -12.4%. On January 1st, the estimated growth rate for Q2 2008 was 4.7%. On April 1st, the estimated growth rate for Q2 2008 was -2.0%. If the final growth rate for Q2 2008 is -12.4%, it will mark the first time the S&P 500 has recorded four consecutive quarters of negative growth since Q2 2001 to Q1 2002. The stock market went on to be crushed from that point in 2002.
- The growth rate for the Financials sector dropped to -66% from -59% during the past week, while the growth rate for the Energy sector increased to 28% from 23% during the past week, Thomson says
- Energy (28%) and Technology (17%) sectors are expecting the highest earnings growth in Q2 2008, says Thomson. The Financials (-66%) and Consumer Discretionary (-18%) sectors are expecting the weakest earnings growth.
- If Energy's growth rate finish at 28%, it will mark the third consecutive quarter of at least 20% growth for the sector.
- Over the previous four quarters, Technology has recorded an average growth rate of 16%. Systems Software, Computer Hardware and Semiconductors industries are the top contributors to earnings growth, accounting for about 71% of the growth in the sector.
Key Findings
These data are important because…
