Slack Spending Means Bear Market Will Roar Some More

By Wayne Mulligan

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Are we seeing a bottom to the bear market?

US stocks are heading for weekly gains. This despite big quarterly losses results from financials Citigroup (C) and Merrill Lynch (MER) and missed estimates from tech giants Google (GOOG) and Microsoft (MSFT).

Think of it this way, says Penny Sleuth editor Wayne Mulligan: “If you want to know whether or not we’ve reached a bottom, then all you need to do is think about the consumer.”

Consumer spending is 70% of US GDP. And consumer spending is slack right now. So calling a bottom to the bear market would definitely be immature.

It’s pretty clear times are tough right now. With three quarters of the population thinking we’re already in a recession and the market sinking by the day, I don’t think there’s any more debating as to whether or not we’re in bear market territory.

So the question for many folks has become: Are we at the bottom of the market yet?

In fact, that’s what inspired this question on TickerHound (and in turn, inspired today’s article):

“In my humble opinion, if you want to know whether or not we’ve reached a bottom, then all you need to do is think about the consumer. In other words, think about yourself and the millions of other Americans out there who are:

  1. Watching the values of their homes drop
  2. Spending twice as much at the pump than they did a year ago
  3. Watching their net worth shrink by the day

“And then ask yourself, has anything changed over the last couple of months? Have things gotten any better or have they gotten worse?”

Unless you don’t own a home, drive a car or do your own grocery shopping, then you might be tempted to say, “Things ain’t so bad.” But if you can relate to what I’m talking about, then you already know the answer this question.

Calling a bottom right now would definitely be premature. Consumer spending drives 70% of our GDP. You cut the consumers’ ability or desire to spend and you’ll watch this economy slow down pretty darn quick.

For more on this TickerHound question, click here…

Source: Is Calling a Bottom Premature?

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About the Author

Wayne Mulligan is a contributing author to The Penny Sleuth.

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The Penny Sleuth is free e-letter from Tom Bulford who shares his innermost thoughts, stories, projections and opiniosn on the UK's most exciting share market. Each issue reveal what every investor ought to know before investing in the small-cap market.

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