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Market Drivers

October 26, 2012 – 5:32 pm

GDP numbers for the third quarter came in stronger than expected at 2% growth. Of course this number will be revised two times before we actually know the real number, but this was a pleasant unexpected surprise.

In recent weeks, as the stock market has been correcting, the economic numbers have been improving. When has it ever been in the summer, economic numbers deteriorate while the stock market marches higher? Why is that? In the summer, it was all about looking forward and seeing a turn up in the economics. Today is all about the election and the fiscal cliff looming. Also, the current weakness has two other elements, earnings season showing weakness combined with ratcheting down future earnings outlook and the fact that the market was due for a correction after a summer of not having one.

There is a constant tug of war between the Bulls and the Bears, but if you focus on the future and the growth of earnings for the future you will have a better understanding of why the market acts the way it does. In the moment, when current news confuses the long term issues, the stock market can and often does act irrational. Do not get caught up in the news of the day. Invest in the long-term economic probabilities. A growing economy means profit growth and that drives market direction.

Good Trading,
Steve Peasley

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