Is the economy bouncing back?

After months of stalling, there are signs the recovery is about to rev up.

By Anthony Mirhaydari Nov 21, 2012 3:55PM

Financial Stock Chart -- Kick Images, Photodisc, Getty ImagesSince September's surge of exuberance, stocks have been sliding lower on a combination of fears over the fiscal cliff, eurozone tremors, and a dramatic pullback in the investment component of GDP growth. But here's the thing: We could be on the cusp of at least a short-term turnaround.


Republicans and Democrats seem to be inching towards a compromise that would push tough choices on tax hikes, spending cuts, and entitlement reforms into 2013. And there are signs that, after cutting new orders and drawing down inventories, businesses are being forced to increase spending again.

 

If so, a rebound in business activity could push stocks out of their funk for the next few months as we enter what's historically a strong seasonal period for the market. Here's why it's time to shed the fear, and embrace a little holiday cheer.

 

JPMorgan economist Bruce Kasman notes that early reports on October's economic activity bolsters his confidence that growth is poised to lift through the end of the year. For one, JPMorgan's global PMI manufacturing survey has turned around as the new orders index rose and the finished goods inventories index fell for the second consecutive month. That's been a reliable signal of a positive shift in growth in the past.

 

Growth is being led by the United States, as well as Mexico, Canada, Brazil, Denmark, India, Indonesia, Ireland, Russia, the Netherlands, and Turkey.

 

The early signs of hope were confirmed Friday by the Markit Flash U.S. PMI manufacturing survey for November, which strengthened to a five-month high signaling a "moderate improvement" in manufacturing conditions. Both production output and new order growth accelerated to a five-month high while employment grew at its best clip since July.

 

 

As the chart above shows, the rebound should start being confirmed in the Fed's measure of manufacturing output soon.

 

Hurricane Sandy might be clouding the data somewhat, but nonetheless the team at Capital Economics believes the data implied manufacturing output will start expanding at a three-month-over-three-month annualized rate of around 3%; rather than contracting at a 3% as it did in October.

 

Combined with my expectation of additional Federal Reserve policy easing at its December meeting, overly pessimistic investors, and the growing likelihood that Greece will receive not only its next bailout aid disbursement -- but a debt reduction and bailout program extension as well -- I think this manufacturing rebound will force traders to cover their shorts and provide the kind of buying power to the market that hasn't been seen for months.

 

 

For now, I continue to recommend a focus on crude oil, silver, and individual energy names including Tesoro (TSO) and Valero (VLO). Both positions are up more than 7% since I added them to the Edge Letter Sample Portfolio earlier this week.

 

Disclosure: Anthony has recommended TSO and VLO to his clients.

 

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

 

 

78Comments
Nov 21, 2012 4:13PM
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All that's bouncing around is the freshly printed money.
Nov 21, 2012 5:53PM
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No real growth as long as Bernanke keeps interest rates at  zero

Nov 21, 2012 5:06PM
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This guy's theme should be "any way the wind blows" or something like that. It was a week ago he was predicting doom forever. A month ago growth forever. etc... My dog can predict stuff better than him.
Nov 21, 2012 4:56PM
Nov 21, 2012 5:29PM
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The stock market may see a bounce but the general economy is in for a long slog. High unemployment, struggling housing, high energy price and food prices coupled with low paying jobs for those able to find work all will weigh on this "recovery".  Now add a tax hike ala Obamacare and a tax rate hike even if limited to the $250K and up crowd and you have a perfect storm for a recession.
Nov 21, 2012 7:32PM
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No the economy is not coming back; interest rates are too low, businesses are not growing, and Obama is president. As long as Obama is president the economy will remained semi-tanked at best. And don't count of a great deal being reached on the fiscal cliff. Gridlock will prevail for the next four years.
Nov 21, 2012 6:33PM
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Obamacare taxes kick in on employers in January.  If its the job kill like they think plus the fact that our government is facing a possible shut down on March 1, 2013, recovery, you got to be kidding.
Nov 22, 2012 2:14PM
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The way to make an economy appear to be growing is simple, inflate the money supply, ignore the resultant price increases, and apply a bogus deflator to the aggregate figures. The FED has this down to an art form. However they won't be able to hide the truth forever
Nov 21, 2012 8:33PM
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No, Class 8 truck orders were down, recently.  The first sign less is moving over the nation's highways. When trucking companies slow down ordering trucks, that tells you demand is down for moving commodities over the highways. 
Nov 21, 2012 7:21PM
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Now we are just hoping that Congress will succeed in kicking the can into 2013.  My how our expectations have lowered. No one even noticed the French downgrade but that would have crashed things on a normal day.  Seems like everyone is just getting numb to bad news.

 

Anthony's short term turnaround might be too short to time.  For me anyway.

Nov 21, 2012 5:50PM
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I know somebody who disagrees with Tony.  That White Plains bankruptcy judge who just gave Hostess the green light to bring down the hammer on 18,000 damn fools out on strike.

 

At least we'll be able to start whittling down the nation's deficit with the additional government revenue from selling legal pot.

 

Merry Christmas.

 

 

 

 

Nov 21, 2012 8:18PM
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Not bouncing back at all where I live.  I can tell by all the homeless people I see and the sky high prices for everything.
Nov 21, 2012 6:58PM
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I'm still hoping for an improved economy, even if I haven't seen it yet.  I'm not a fan of Obama, but I'd like to see his policies work in order to get Americans back to work.  So far, I don't feel or see any improvement.  My shopping dollar has really shrunk, so now I'm beginning to spend very carefully. The rising prices of food and gas and electricity, and everything else is really beginning to hurt...and I have a job.
Nov 21, 2012 6:50PM
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just like global warming, these guys also stick their heads in the sand about the global slow-down ... just another pollyanna pumping out sunshine ....
Nov 21, 2012 5:18PM
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"JPMorgan economist Bruce Kasman notes that early reports on October's economic activity bolsters his confidence that growth is poised to lift through the end of the year."

Is he willing to put his career where his prediction is? All indicators point to catastrophic failure not wishful steering by fake banks and phony financiers. You Tony... will be whining doom and gloom next week when big retailers try to explain the total bust of holiday rush. Unemployed people don't buy up their credit cards. Generation Airhead accounts for 70% of all existing debt. The cards may swipe but the authorization isn't going to happen. Let's not leave out the Wal-Mart strike on Friday. Without an immediate resolution, strikers will tell their 10 friends and so on and so on. Wall Street doesn't shop in Wal-Mart, union workers "did".
Nov 22, 2012 12:45AM
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Economy about to rev-up You have a lot of nerve to write this BULL"S" to your readers ! As the saying goes a great liar ALWAYS TELLS THE TRUTH !
Nov 22, 2012 6:41PM
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Anthony, you are forgetting 2 big events that are about to take place. #1, the debt ceiling is about to get hit. What will the leaders do about that? #2, the unlimited FDIC insurance on non interest bearing accounts will expire on Jan. 1st. Then the limit becomes $150,000. That will hurt the small regional banks big time. Money is already flowing to the "too big to fail" banks. It will only accelerate leading up to Jan. 1st. and beyond. Put those 2 events into your crystal ball and see what happens.
Nov 21, 2012 8:15PM
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We are now seeing the real cost of all those cheap imported goods.

We thought we were saving sooo much money!

Now we have hyper-inflation,high unemployment, more crime, etc.

I think all those imported goods actually cost us double or triple of

what American quality goods would have cost!

 

Nov 22, 2012 9:33PM
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I had a nice day....This afternoon, we had a Thanksgiving dinner; Nothing real fancy...

 

This Morning the Am. Legion Club, hosted/provided dinners for dozens of people in the Community..From about noon until 3 or so...?

We also delivered several meals to Shut-ins,Seniors, some Vets and even to people that were working at a couple locations....

I volunteered and only worked a couple hours, delivered about 20 meals..Someone else was delivering also...In between pick-ups, I enjoyed a couple coffees and a piece of punkin pie at the Post...Chatting with friends.

2 hours in a lifetime...And it was a good time..Didn't ask anyone who they voted for... 

Nov 22, 2012 5:14PM
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Economy "Bouncing" back? The only thing bouncing up is food prices. Huge. Wages? NOT. My company provided health insurance has more than doubled in the last 13 months. The economy is being inflated like Pelosi said she wanted and we are all being left behind to fall further back.
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