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Negative Forecasts: Excessive Concern Not Warranted

Negative Forecasts: Excessive Concern Not Warranted by Todd Sullivan, ValuePlays

“Davidson” submits:

Investors are concerned about China, concerned about consumer confidence, concerned about why in the US the Federal Reserve did not raise rates, concerned about the falling specific country PMI indicators (published by a firm called Markit) as well as our own PMI(Purchasing Managers Index). The media has become awash in negative forecasts by Technical Analyst types. What do they see that the rest of us do not see? The facts are that Technical Analysis, PMI indicators and consumer confidence measures only reflect how people feel, not what they are doing with their money.

The real question that should be asked is what are all these people missing who issue forecasts based only on sentiment! Two charts immediately below show the US GDP(Gross Domestic Product) and the Euro Area(19 Countries) respectively thru July 2015 and below these is the chart for US Retail and Food Service Sales thru August 2015. These are economic measures. They are not sentiment indicators but measures of how people are spending their money. These are counts of the value of production and consumption. One can see that the US data clearly shows that the trend in consumption and production has always slowed prior to recessions(gray shaded areas). It should be easily seen that there is no slowing in these trends since 2009.

In every year of the current economic expansion we have had at least one period of investor pessimism with forecasts that recession is to occur the next few months and stock prices to decline. The forecast for the Dow Jones Industrial Average falling to 5,000 has been made and...