Monthly Archives: October 2012

The Stock Market and the Economy: A Tale of Two Cities

Since the end of the 4th quarter of 2011, the U.S. economy has been contracting. 2nd Q GDP’s most recent revision came in at 1.3% - a pretty concerning level - with most components revised down from previous estimates. Moody’s Economics Group reported that this third estimate was a downward revision from the 1.5% reported in the advance release and a reduction from 1.7% in the second release. While some of the slowdown came primarily from a decline in farm inventories, due to the drought in the mid-west, consumer service spending, exports and durable goods all declined as well. Barron’s noted that business activity contracted in September, for the first time in 3 years, while durable goods orders declined 13% in August vs. July - the biggest decrease in three years as well. Unfortunately, the most recent news doesn’t appear to be getting any better. As Bespoke Investment Group put it in their September 28, 2012 “Week in Review” article, “It certainly wasn’t a great week on the economic front, as 11 reports came in worse than expected, versus just 6 that came in better than expected,” and, “It’s hard to imagine where this market would be without QE3.”Read more