Signal Ahead?

I don’t spend a whole lot of time watching the talking heads on MSNBC, Fox Business, and the like (although I can get behind Morning Joe.  Good dude.) But as a certified news junkie I have been noticing trending in a couple of items recently.

  • Brazil is in a recession. So what, it’s Brazil, right?  Brazil has a population approaching 200 million, and a GDP of approximately $2.4 trillion.  This makes it about the world’s 7th largest economy.  It’s also shown GDP growth consistently 2% higher than the US for the past 10 years.
  • Germany’s GDP Contracted, too.  You’ll remember Germany as the world’s 4th largest economy.  (And for Oktoberfest. Hello, fall!)
  • China’s manufacturing output is slowing.  Presented without comment.
  • Japan’s economy contracted in August.  It would seem a lot of that is driven by a change in tax schemes, but still… BTW, Japan is the world’s third largest economy, behind the US and China.

Ok fine, but what about the US, right?  GDP grew at 4.1% in the 2nd quarter.  Of course this is in stark contrast to the -2.9% in first quarter 2014.  Reasons for the -2.9%?  Oft cited as a slow down in the housing market and the confluence of an unusually cold winter.

So maybe all of the other negative trends in those other countries (all of whom are closely tied to the US) are a fluke.  And maybe we agree that the belly flop in 1Q14 GDP was a fluke as well (even though weather happens all the time, and that rising interest rates likely mean slower housing trends), but what about the stock market?

No worries there.  The Dow Jones hit its all time high on July 3rd, closing above 17,000.  Of course during the last bull market the DJIA hit a record July 19, 2007 at 14,000.  I think we all remember how those next 12 months or so went.  And in case not, here’s a great chart that plots our last two “bubbles.” And this one.



 Update: Japan contracted 7.1% for full 2nd Quarter 2014.  Ouch.  Sorry to pile on.