Coming Week: Don't Get Fooled Again

Among the slew of economic reports due to be published next week is one that could lead some investors to believe that the worst is over for the economy.

But wise investors would do well not to be comforted, experts say. The data point in question is the Commerce Department's first read on second-quarter GDP, which will be published Thursday. The consensus estimate is that the economy grew 1.8% from April through June.

That's well above the anemic 1% in the first quarter and could lead some observers to believe the economy is on the rebound. The problem is that it likely isn't.

"It probably represents the apex in growth in 2008," says Joe Brusuelas, chief economist at Merk Investments. "This is not a story of a resilient consumer or a miraculous turnaround. This is the story of a well-timed policy response to the economic downturn."

The expected bump in growth can be attributed to the rebate checks sent out earlier this year via the economic stimulus plan. Now that the money has all been spent, there's little to support consumption for the rest of the year, Brusuelas explains.

He says the initial market reaction to the seemingly robust economic data could be a short rally. But that could quickly be torpedoed when analysts have enough time to look more closely at the details or by other new figures out a day later, namely payroll data from the Labor Department.

Brusuelas expects the employment figures to confirm the worsening economic situation with 93,000 more jobs lost, adding to the year-to-date total of 438,000. The consensus expects companies to have slashed payrolls by 68,000 during July.

Michael Darda, director of research at MKM Partners in Greenwich, Conn., agrees that the second half is going to look weak and could get worse. The key to high stock prices, he says, is the three-way interaction between valuation, sentiment and well-functioning credit markets.