Daily Bullets …………..For April 30, 2014

·         1Q GDP surprisingly weak……First quarter real GDP growth came in at an anemic 0.1%. This was primarily a reflection of severe weather which affected many areas of the economy. Consumer spending was relatively healthy at 3%. What’s the point?  1Q GDP is not a reflection of the economy’s future growth potential. Most of the recent economic indicators for March and April are reflecting an acceleration in economic activity. We expect this to continue, which has positive implications for corporate earnings. Link: http://www.cnbc.com/id/101627906

 

·         April job growth strong……More recent indicators of economy are strong, reflected in today’s April private sector new jobs report, which at 220,000 was stronger than expected. What’s the point? With March’s private sector jobs number revised up to 209,000, it appears the economy is accelerating, as we have anticipated. We think the stock market is already discounting to some degree, an acceleration in the economy. The positive case we see going forward is improvement in GDP growth to a moderate, sustainable pace, with moderate inflation, which is a positive scenario for stocks. Link: http://www.cnbc.com/id/101627638

 

·         Fed expected to further cut stimulus…The Federal Reserve is holding its FOMC meeting today and is again expected to continue the tapering of its quantitative easing (QE) program. What’s the point? This move will come as no surprise to the market, particularly given the recent spate of stronger economic data. One major concern for investors is that reduced QE could negatively impact stock prices due to lower liquidity sloshing around the financial system. It is a risk,  however, with an improving outlook for the economy, and continued strong corporate earnings and cash flow, we believe over time, the positive fundamentals and improving valuations can offset the gradual reduction on QE. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140430&id=17570511

 

·         Economists see improving outlook……Economists are expecting an acceleration in growth in the U.S. economy driven by improvement in business investment and job growth as the year progresses. What’s the point?  While we realize economists do not always have the best “crystal ball”, the current economist survey does support the work we do and outlook as we see it, that there is pent-up growth potential in the economy which will be driven by more people working and a gradual improvement in Europe. One potential "fly in the ointment" for global outlook: China. We are watching the slowdown in China, which does add an element of risk to global growth outlook. We think emerging market economies are more exposed to this risk, not so much the U.S. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140430&id=17570462