Gross Domestic Product

Great news on GDP today, we have now had four quarters of improving GDP. Today’s number showed GDP up 5.7% and is the second positive number. The critics say it is stocking up inventory only causing it, however when companies see an upturn coming they need to fill their inventory. This means since the last two quarters have been positive now it clearly puts the recession behind us which some say was the worst recession since the great depression.


The stock market as measured by the Dow took the news with a jump of +110 points at its high only to later fall back and end down -53 points. This is why it’s important to follow the trend and wait for a follow through day. Some of the biggest jumps can occur in a down market and people can get suckered back in. Wait for the indexes to come off their bottom then confirm 4+ days later with a follow through day. If you don’t do this you end up buying stock on every temporary jump back up.

One final thought, GDP is a measure of top line growth and does not necessarily reflect a companies profits, it is more a measure of production increases. To people that say the market should be up on this news and not down all I can is we have just had a 60%+ increase (as measured on the DOW) since March 09 and now we have a 6% correction. This should be expected as nervous people with big profits start taking those profits. Let’s wait and see if the market can stabilize and form a new base, only time will tell.