Year-end rally faces slowing world economy

The US Commerce Department has revised third quarter real GDP growth to an annual rate of 3.9 percent, up from 3.7 percent previously reported. Second quarter real GDP growth was 3.3 percent.

In another release yesterday, the Conference Board reported that its consumer confidence index declined to 90.5 in November from 92.9 in October. The Expectations Index declined to 87.4 from 92.2 while the Present Situation Index edged up to 95.2 from 94.0.

Another piece of bad news yesterday: Japan's industrial output fell 1.6 percent in October. And it may not get much better in the near future. Based on a survey of manufacturers, Japan's Ministry of Economy, Trade and Industry forecasts that industrial output would rise 3.7 percent in November but drop 2.2 percent in December

Based on these, I see no reason to change the view I expressed in "Slowing world economy poses risk to stocks" that the trend in world economic growth is down. The end of the year may traditionally be a good place to be in stocks, but there are always exceptions, and contrarian plays are often a good bet, especially with such a well-known phenomenon as the year-end rally. Asian stocks, though, may be more resilient based on liquidity considerations.