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Economists lifting growth forecasts…According to Philadelphia Fed’s quarterly economist
survey issued today, consensus growth estimate for Q2 is raised to 3.3%, up
from 3.0% and growth in 2H-14 is also increased.
What’s the
point? Recent consensus has been that
the economy should accelerate in 2014. We think that is still the case,
primarily reflected in recent stronger employment growth data. However, over
the past week, we have seen increased investor concerns that economic growth
will be less robust than earlier expected. The reasons for this are weak Eurozone
economic data (0.2% growth in Q1) and increased concerns over slower growth in
China. As a result, there has been some movement into bonds and out of stocks.
If growth is in fact slower than expected, we think stock market downside is
probably limited due to valuation, which remains reasonable, and continued
investor demand for quality dividend-paying stocks. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140516&id=17626488
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Bullard sees inflation picking up…..In a speech today, St. Louis Fed President James
Bullard stated that in his view, U.S. economy will accelerate and grow at “a
robust pace” for rest of year, and that inflation should move closer to Fed
policy goal of 2%.
What’s the
point? It is encouraging that a Fed
regional president has a more optimistic view towards the economy. The Fed does
extensive and thorough economic research. Given the very slow pace of the
global economic recovery, for inflation to move towards the Fed’s policy goal
of 2% is probably a good thing because it reflects a strengthening economy.
Despite Bullard’s comments, we believe the economy is still quite a ways from
“worrisome” inflation. Europe is still dealing with significant risk of
deflation and there remains a lot of capacity and labor slack in the U.S.
economy. As of now, we still do not see a significant risk or probability of
“high” inflation. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&Date=20140516&ID=17627118&topic=TOPIC_ECONOMIC_INDICATORS&isub=3
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