2.5% is really “that bad” ?

So the “concern du jour” is lower than expected 1Q GDP growth: 2.5% instead of the expected 3%.  As usual, we see a lot of quotes this morning from so-called “experts” conjuring up new concerns about slowing growth to wit: "There are some concerns as we head into the summer," said JJ Kinahan, chief derivatives strategist for TD Ameritrade. "In the last three weeks, we've have seen numbers that weren't exactly what you'd love to see."  C’mon. The economy showed decent improvement in Q1 over Q4 (+0.4%) despite a drag from a decline in government spending, which is estimated to have cut Q1 GDP growth by 0.8%. It was also encouraging to note that consumer spending was the strongest in over two years. That’s important because consumer spending is over two-thirds of the economy. And while hiring remains slow, business spending remains relatively healthy. Point is, the improvement in Q1 GDP is a positive but the tone of this recovery has not changed: it will continue to be a slow, grinding recovery. In the meantime, the private sector continues to do OK. Corporate earnings and cash flow continue to improve, providing a positive backdrop for stocks. In fact, analysts actually raised their forecasts for 2Q earnings growth from 1.5% to 3.6%. From a financial planning perspective, we believe a normal allocation to equities is warranted with some of our favored sectors being real estate, health care, and large-caps.