“Market Radar” Update: October ’10

Below are my updates to the “Market Radar”, a concise and simplified exhibit showing what current headwinds and tailwinds are affecting the economy.

Changes to the “Market Radar”

Feeding off my Monthly Bull/Bear Recap and Succinct Monthly Economic Status, here are the latest changes to the “Market Radar”

  • Headwinds
    • I’ve renamed “US/China Currency Confrontation” to “Currency Wars” as this issue has transformed from a bi to multi-lateral one. The G-20 meeting did not generate the clarity the market was looking for.
    • “Iran/Israel” has been replaced with “Housing Market” as the “Faux-closure” crisis is quickly morphing into a serious headwind due to deteriorating confidence in home buying.  Sales may decrease (already being reflected by Mortgage Applications) and activity disappear, causing another leg down in housing prices.  This doesn’t include the added negative of large amounts of inventory hanging overhead.  This issue has weighed on the financials as they haven’t participated in the latest rally.
  • Tailwinds
    • I am replacing “Low Interest Rates” with a new tailwind called “Weakening Dollar for Exporters” as a declining dollar is spurring a flurry of new export orders as per the Non-Manufacturing ISM report.  This report represents close to 90% of the economy, so the recent jump in the sub-index will undeniably lead to more production and perhaps more jobs. I am replacing “Interest Rates” due to the economy having fully adjusted to this tailwind’s benefits.
    • I am moving “Job Creation” up two spots due to improved jobless claims reports (confirmed by the Gallup Poll), while “Manufacturing” and “Business Spending” have shown signs of weakness in the form of sluggish industrial production numbers and regional ISM indexes.  The strength in the manufacturing sector has clearly decelerated over the fall.
  • Events
    • No Changes

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—> What’s my forecast you ask?  See here.

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