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.

 

 

66Comments
Nov 23, 2012 4:11PM
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Sometimes watching the fight that ensues is half the fun....

What's the fun part..Is everyone brings a MORON club to the fight and then end up, clubbing themselves.

 

Two reasons I have might entered or stood my ground, was because of the outright lies or mis-representations...And what appeared too many times the thinly VEILED Racism, that seem to be rampart a majority of the time.

I feel that a sitting President deserves more respect then that, and should only be faulted on their stupidty or failed Administrative Policies...

And for the "most part" none of that, never affected us personally over the "total" 4 year tenure.

Congress on the other hand "failed America."  

Nov 23, 2012 1:18PM
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Most Authors here on MSN are not here to appeal to your Political Persuasion; They are here to provide investing ideas, marketing trends and some overall financial situations affecting Wall St...

And maybe your investments....IF you are an INVESTOR or a person that has an interest in such..?

 

It seems only the Commentors on here, having Raging and Ranting Views on how "their GUY" or the "other GUY" they can't stand has or could have had on the Markets...

Although Politics/Adminstrations/Congress and Elections can effect some Markets in some fashion,

it normally is not long lasting; And investments in long standing good Companies usually do.

 

Being amidst  one of the U.S.'s worst Recessions, has a whole new meaning as far as investing/saving, but still in the long run it can be overcome with decent choices; Using every idea or available knowledge at hand and making the wisest choices from that....That's what I'm here for, to learn.....And not to discuss previous Presidents, Campaigns and sitting Administrations; I find it boring at times and useless at best.....For what we are trying to accomplish. 

Although they do have Articles/Bogs about Politics and the Markets, that may be the place that many should go.

Nov 23, 2012 9:45AM
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Mr. Anthony is writing to fill space now the election is over.  There are too many increased built in costs for business kicking in the next couple of years to allow any meaningful growth movement.  The fed depiction of low inflation is falicy.  Everyone suffers when currency is debased.  We have the similar economic environment of 4 decades ago, its called stagflation.  Wages are low, money is worthless, high inflation, all are recipes for economic malaise.  With artificially low interest rates and real inflation at about 5 or 6 percent a large segment of the population just sets on the accumulated savings.  When the puppet federal reserve realizes interest will need to increase, interest on the national debt will consume vast portions of tax receipts. 
Nov 22, 2012 9:50PM
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BTW....Crazy...Chesapeake had better start getting their shidt together, or we will just take a loss on the rest and walk away to something better... 
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 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 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.
Nov 22, 2012 4:58PM
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FRIHOLEE......You must have taken down your original post........Hmmmm???

"Since when is DEBT a good thing or "makes money"....."

 

I gave you a damn good example; But never ENDORSED a Country leveraging itself to the hilt.

Every fool knows that doesn't work "forever." 

 

Then you came back with, LMAO......I guess that is "the best" you've got ????

Good luck with that.....And have a nice Thanksgiving Holiday.

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 22, 2012 12:19PM
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On Top of all that....Have a nice Thanksgiving and Holiday Weekend...Cheers&Blessings.
Nov 22, 2012 12:10PM
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Frijole....Debtholders can be AKA "risktakers"...According to the CEO of Hostess, Rayburn (using as  example) A private investment firm or group of investors...

Are crying their azzes off about all the "DEBT" and losing capital....

1.....But they(the executives) voted themselves large raises..

2.....Wanted unwarranted concessions and wage cuts from their 18,500 employess..

3.....Were going to slash pensions...

4.....And said if demands were not met, they would close the doors..

5.....They did...And declared Liquidation Bankruptcy.

Now 18,500 appx. will eventually all go on Un-employment, Pensioners will probably go on the Government Pension pool....After selling all assets including Brand names,etc..The Debt holders will probably walk away with $100s of Millions in their pockets ?? 

THIS SHOULD NOT BE THE AMERICAN WAY...

I believe the Government should sieze all assets, collect 2 years(99 weeks) U/E and fund existing pension plans for up to 10-15 years.

Then take what is left to be split amongst the Debt Holders..

Hopefully something of like this would discourage Venture/Vulture type Capitalism..

Yes Debt ...Can begat prosperity, just depending how crooked you play the Game..

Nov 22, 2012 10:44AM
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What are these bears smoking? Corporate profits are up 78% in the last 46 months.There`s

been 32 straight months of job growth.When this fiscal cliff is fixed the markets are going

thru the roof.You`ll live in regret, big time.

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 12:22AM
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The economy will rev up as soon as the news makers. read hedge funds, investment banks and Wall Street reporters, have taken their capital gains for 2012 to avoid 2013 taxes. That means we're going to see a great big Santa Claus rally that will last well into January if not February.
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 8:19PM
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The shopping season will look pretty good. BUT the reason isn,t real workers spending their hard earned money. Its the people that are on unemployment welfare, the 65% increase in SSI that is so easy to get if you have the right lawyer and doctor, Welfare has increased to 50% above what it was, food stamps that can be spent in casinos or where ever. If it was not for all this government spending the true numbers would show the real story. So for every one that is working paying taxes are keeping the spending flowing.
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 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 21, 2012 7:58PM
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The reason for the sudden change is now that the election is over there is no reason to use the scare tactics anymore. So now America is becoming a great place again opposed to the Apocalyptic waste land  certain people were calling it a month ago.
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.
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