back to Today's Commentary
-- October 1, 2002
Investors turned a blind eye to today's Institute for Supply Management report, and instead went about "bargain hunting." But they are going to regret it later. What investors fail to remember is that a slowdown in manufacturing activity triggered the recession in March 2001. Now, it's about to happen again.
That's because the economy's recovery effort has been derailed. Manufacturing activity has been on the wane for three months and in September it contracted for the first time since January. This is not a one-time event, it's a trend. Plus, consumers have already dialed back their car purchases despite continued zero-percent financing incentives. They've also cut back on apparel purchases -- both the Weekly Chain Store Sales Index and the Redbook Retail Sales Average declined this week. And if consumers are no longer in the buying mood, the economy is really in trouble!
Investors will soon realize that even though stocks have fallen to their lowest levels in years, another severe slump in the economy has not yet been priced in. You see, not only has the economic recovery not come to fruition yet, it is a lot farther off than investors realize. Bottom line: The bear market is far from over and stocks are nowhere near the bottom.
Manufacturing Shrinks, 1st Time Since Jan