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POLITICS
>Illegal Immigration: No Common Sense!"
by
Considering the U.S. GDP was 5% in Q4 2009, to now 2.4% in Q2 of 2010, it is safe to say we are in a downward trend, and the timing couldn't be worse for President Obama.
Obama knows this is a downward trend that must be reversed asap if he wants to keep his job and not be the first one termer since Bush Sr. Ben Bernanke made some comments in regards to consumer spending, which accounts for roughly 70% of the economy, stating that it, "seems likely to pick up in coming quarters from its recent modest pace."
What world has Bernanke been living in?
You can expect many more rosy comments from the Fed and White House as the best market manipulators in the world attempt to make team Obama look like the saviours they were once thought to be.
At Pinnacle we are constantly monitoring the global and US manufacturing numbers. During the crash and recovery of the stock market, the manufacturing index chart mirrored that of the market. Over the past year, US manufacturing has recovered and has been a leading indicator. With that stated, things are slowing down and we all need to be aware of this as it is very telling of what is to come. US manufacturing expanded for the 12th straight month in July, even though it was the slowest growth in 8 months. The JP Morgan Global Manufacturing PMI posted 54.3, its lowest reading in eight months, but still consistent with a solid rate of expansion. Remember that anything above 50 represents growth.
Don't take your eyes off the US Housing Market
No economies can stage a meaningful comeback without a solid housing market as it creates the majority of most people's net worth.
The results for new-home sales in June were pitiful as only 330,000 units were sold. This is the second lowest on record. It is no co-incidence that government incentives (expiration of first time home buyer credit) to purchase a home had just expired. Real growth and real buying have yet to be seen. Fannie and Freddie foreclosures increased sharply--up 21% in June from May.
The second half of 2010 will be the most pivotal for the US housing sector and the economy as a whole. It is estimated that more than 25% of the nation's mortgages are still underwater. A further fall in home values and/or more delinquencies could send the housing market back into a free fall. This is something to keep a close eye on as it could very well determine the market's performance in the second half of this year.
Have we been leaning on China for too long?
China was the main driver of commodities before the financial crisis and after the crisis. Demand from China has singlehandedly kept many commodities and the Canadian and Australian markets strong for years. It is important to many of our investments and the health of the overall markets that China continues to expand and put up strong GDP numbers. Beijing has stated China's full-year expansion in 2010 is expected to be as high as 9.5%. Recent data has indicated otherwise, as China's economy has been slowing down due to Beijing clamping down on property markets.
Key Fact: China's manufacturing (PMI) grew at the slowest pace in 17 months in July.
With the midterm elections approaching quickly and Obama feeling the heat, we fully expect to see many overly optimistic speeches from the White House, positive forecasts from Bernanke and surprise revisions to GDP numbers. Thanks to this plunge protection team, the markets will likely continue to hold up despite all the negative, fundamental data detailed in our report. No one said the market always functions properly. We aren't dumb enough to disobey the number one rule one learns when working in the finance industry... Don't fight the Fed.
All the best with your investments,
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