|How can I use this information?
Don't invest in the stock market just because the Gross Domestic Product is growing.
GDP growth is not a reliable signal. A growing economy and positive forecasts
published by the government or private economists only provide a false sense of
security. Virtually all of the bear markets since 1950 occurred when the economy was
growing or suffering through a minuscule GDP decline.
It was commonly understood that the U.S. economy was under traumatic stress during
2001 and 2002. The constantly rising GDP figures during those years appear to be
inconsistent with that perception. GDP represents the value of goods and
services produced within a country's borders. It is a Gross Revenue figure. It
is not a profitability indicator. It doesn't reflect the costs involved in producing those
goods and services. In other words, GDP can go up while profit goes down. The
health of the stock market is related to profitability, not gross sales. While it is
possible for sales to rise and profitability to fall. It is very difficult to maintain profitability
with persistently declining sales. Therefore, in the unlikely event of significant
and persistent GDP declines, get ready for a multitude of corporate heart
attacks. If GDP grows, just yawn.
Expect GDP to avoid declines of the magnitude experienced during the great
depression. The government will follow Japan's example and spend enough to keep
GDP above water. However, as GDP exhibits growth, don't place your faith in it. The
financial journalists, commentators and advisors may all agree that a growing GDP will
save the day. However, what everyone assumes to be true often is not.
SignalTrend's unemotional computer timing system is currently bearish, but it may
change its buy / sell signal in the near future. If that happens, SignalTrend will notify
you by email. Remember, SignalTrend's stock market timing system was backtested
100 years with excellent results!
J. C. Phillips,
If you have a topic or theory you would like to know more about, please fill out the
"Suggest a Topic" field below and click submit. If your topic is accepted, SignalTrend
will do the research for you using our computer programs and extensive database. We
want you to get the most out of your subscription to SignalTrend!
|1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
|Will a Growing Economy Revive Stocks?
Strategy Research: Summary, Analysis and Long Term Test Results
|1966 - 1982
|GDP, DJIA, S&P 500 and NASDAQ
|SignalTrend Inc. 2008 All Rights Reserved.
|Link to Previous Issue of Investment Tips