Market Direction Mid Week Update

Market Direction: BULLISH alert issued 6/2/2016

Every month, The Wall Street Journal asks a group of about 70 business, financial and academic economists to provide their forecasts for the year ahead. Among the questions we ask is how their forecasts might go wrong. What might cause the economy to grow more slowly, or even knock it into recession?

Earlier this summer, we recapped the four biggest risks that economists thought could push the U.S. economy into recession. Those same risks are still out there.

But for the sake of completeness, here’s the other half of that story. Surprises are not always negative, and anyone who has been forecasting for decades like the economists in the WSJ survey has learned that it’s possible to be wrong in both directions. With that in mind, here are four factors that survey respondents think could cause the economy to do better than expected in the coming years.

The U.S. economy is driven by consumer spending, and the consumer might end up doing better than is commonly appreciated. About 30% of economists cited the possibility that consumers could surprise.

“Consumers are in good shape to spend more,” economist believe.

By now, pessimism about consumers is baked into many forecasts. But several facts suggest a surprise is possible: wages have slowly but surely increased, home prices have recovered in many cities, and the stock market has soared. Saving rates have hovered in recent years at around 6%, compared with as low as 2% in the years before the recession.

There’s no doubt many Americans have missed out on these gains. But there’s certainly a possibility that some consumers may have more spending power than is currently expected.

Business Investment Revival 

Business investment has slumped in the U.S. for three consecutive quarters. Many believe that one reason for this is the current political climate. But another factor is clearly the plunge in commodity prices, which caused U.S. oil producers to pull back on capital-intensive oil investments.

But the thing about that oil-price decline? It began in 2014. It’s beginning to be old news. About 20% of economists said the biggest upside surprise could be a better-than-expected turnaround in the levels of business investment.

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The all-time highs since our initial recommendation to go LONG this market. Here is how the markets have performed:

Stock Market Direction Recommendation (6/2/2016)
Dow	up 884.05 points a 4.95% gain	8/15/16
Nasdaq	up 300.00 points a 6.12% gain	8/23/16
S&P 500	up 88.55 points a 4.21% gain	8/15/16

Related Link: http://www.stockmarket-direction.com/