US Growth is Expected to Stay Above the Forecast Rate
$DIA, $SPY, $QQQ, $VXX
- Econ 101: no inflation no growth.
Investors have been underestimating the importance of US economic growth for Fed policy, and giving too much relative emphasis to inflation and wage data that have tended to disappoint expectations,
If it starts looking more likely that US growth will stay above its potential rate, that could boost the chances of a labor-market overheating that hastens the pace of Fed rate increases, a lead Goldman Sachs’ (NYSE:GS) economist wrote in a 17 December note.
“While we believe the heightened market focus on price and wage data is indeed warranted, we think the market may be under-appreciating the importance of growth indicators for the monetary policy outlook,” the Goldman analysts wrote.
“The Fed does not require rising or above-target inflation to tighten policy on a Quarterly basis, so long as the broader economic outlook remains consistent with a return to target.”
Goldman has forecast the Fed to raise rates 4X next year, while Fed officials in their 13 December policy announcement stuck with a prediction of 3X.
Minneapolis Federal Reserve Bank President Neel Kashkari has dissented 3X in votes at the central bank’s policy meetings which raised rates despite low inflation. Tuesday repeated his view that the labor market still shows signs of slack and could be improved.
“Why should we raise rates until we actually see inflationary pressures building?” Mr. Kashkari asked at a Lambda Alpha International meeting in Roseville, Minnesota.
He added that by his estimate, 1-M workers are sidelined and could return to the workforce if the job market continues to strengthen. “We are better off letting inflation come to us than preemptively cutting off the expansion by raising rates prematurely.”
Econ 101: no inflation no growth.
After a year of healthy global economic growth, economists are predicting pretty much the same for Y 2018.
The notion is that all is pretty much on track for growth that will be stronger than in Y 2017.
Part of this may come from the fact that forecasters generally got it wrong last year, under-clubbing this year’s economic performance, particularly for the Eurozone and Japan.
The International Monetary Fund (IMF) saw Y 2017 global growth at 3.4% with advanced economies advancing 1.8%. It now sees them at 3.6 and 2.2% respectively.
It had the Eurozone and Japan growing 1.5% and 0.6%. It now has them at 2.1% and 1.5% respectively.
“Faster growth is reaching roughly two-thirds of the world’s population,” the IMF said in December on its website.
Tuesday, the US major stock market indexes finished at: DJIA -37.45 at 24754.75, NAS Comp -30.91 at 6963.85, S&P 500 -8.69 at 2681.47
Volume: Trade on the NYSE came in at: 844-M/shares exchanged
- NAS Comp +29.4% YTD
- DJIA +25.3% YTD
- S&P 500 +19.8% YTD
- Russell 2000 +13.2% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Very Bullish (0.66)||Very Bullish (0.56)||Very Bullish (0.83)||Very Bullish (0.58)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Very Bullish (0.61)||Very Bullish (0.67)||Very Bullish (0.58)||Very Bullish (0.58)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Very Bullish (0.50)||Bullish (0.33)||Very Bullish (0.52)||Very Bullish (0.64)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Bearish (-0.45)||Bearish (-0.49)||Very Bearish (-0.57)||Bearish (-0.29)|
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