More Proof Stock Market Has Discounted Worst for the Economy
Monday, April 7th, 2008
By Michael Lombardi, MBA for Profit Confidential
A funny thing happened last week with the stock market and the economy… they went opposite directions.
Friday, the U.S. Labor Department reported 80,000 job losses for March — the largest number of jobs lost in a single month in the United States in five years. The U.S. jobless rate is now 5.1%, the highest since September 2005.
In total, 232,000 American jobs have been lost in the first quarter of 2008 — carnage for the economy.
But to the stock market… the worsening economy doesn’t seem to bother it. In fact, while the poorest job report in five years was reported, the bellwether Dow Jones Industrial Average lost only 16.61 points on Friday.
Here’s what no one else (but me) seems to be talking about:
— Since mid-March, as the economic news in the United States has worsened, the Dow Jones Industrial Average has risen more than eight percent.
— Since mid-January, as the housing situation in the U.S. has become more pathetic, the Dow Jones U.S. Home Construction Index has risen a whopping 51%!
What’s going on here with the stock market?
As I have written many times, the stock market is not a lagging indicator; it is a leading indicator — likely the best leading indicator of the economy in the world. That’s why I call the stock market the smartest investor in the world.
The stock market is telling us that the worst for the economy is behind us… Bernanke’s rate cuts and other maneuvers are working.
As investors, we need to remember that the economic news coming out today tells us what has already happened in the economy. The smartest investor in the world, the stock market, already knows what has happened — it is concerned with what will occur in the future… six months to one year out. And, right now, the stock market likes what it sees ahead.
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
