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Market Commentary: The Battle

July 29, 2008 – 1:01 pm

There is not going to be much in the way of economic numbers this week until Thursday when we get the first look at the second quarter GDP numbers. Current estimates are calling for 2% growth when last quarter we grew at only 1%. This estimate is higher than it was a month or two ago as the experts have changed their opinion. On Friday we get unemployment numbers, construction spending and ISM numbers. That will give us some idea of how weak our economy has gotten. Most everyone thinks these numbers will be weaker than previous months.  

Continue to watch oil and other commodities. The market has been moving up and down in the opposite direction of oil but at some point that will disconnect, just not yet.  

It makes sense for oil prices to continue to fall as long as our economy and the rest of the world’s economy slows. But a slowing economy also means lower earnings for corporations. The battle is that lower oil and commodity prices reduce inflation which in turn may mean eventual higher earnings. This battle between, inflation, earnings and growth is playing out and until there is a resolution the stock market will struggle to go higher.  

Earnings this season have looked pretty good so far. We will get more this week. Earnings and economics are important but until the investors change their negative impression of the future it’s a time to be careful. 

Good Trading
Steve Peasley

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