Economic Review

5/04/09

Will core fundamentals have an affect on Stocks or will price activity continue to follow charts?

Some of the most important long term economic growth indicators are GDP and the Employment report. Last week the GDP report came out below the pessimistic forecasts, posting a negative 6% reading, yet Equities found the strength to rally. In fact, the tech heavy NASDAQ Index is up around 7% in 2009, despite the lack of any real bounce in economic activity. One could argue that a majority of institutions beat the streets on earnings expectations, however the comparisons were to horrendous numbers posted the previous period.

This Friday, the markets will be greeted with the Employment report, a data series that is raising red flags to the sustainability of earnings recent Bail Out Bank Babees registered just a couple of weeks ago. Without trying to predict the actually employment numbers, there is a high likelihood of continued acceleration in job losses. So the question remains, with consumers faced with increased uncertainty over the stability of income will Stocks continue to post a rally on phantom growth prospects?

Stephan Kudyba (MBA, PhD) THE MARKET DOCTOR

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