Despite their reputation, I think Goldman Sachs has an excellent research department. Here are some of their latest thoughts:
1. Our GDP growth rate of about 1.6% will double next year. (This would be huge!)
2. Inflation is not on the horizon, due to slack labor and weak commodities. (Why wouldn't it be affected by such strong GDP growth?)
3. Fed tapering of QE will be announced in September & start in Q2 of next year. (Remember the hissy fit the market had to Bernanke's press conference in late May? It fell all June because it was panicked over reducing the monthly amount of QE or bond buying.)
4. The S&P will end the year at 1,750 or up another 3%. (That would NOT be huge, but why wouldn't it be impacted by the September announcement of QE tapering?)
5. Long term interest rates rising a quarter point next year and a full point by 2016. (Due to growth or to Fed action?)
6. Despite large deficits, the dollar will not weaken, due to rising interest rates in U.S. (But, our American exporters want the dollar to weaken.)
7. Gold remains flat at $1,200 past 2015. (That assumes no inflation and no growth in India & China.)
I was disappointed they didn't discuss the impact on the market from the debt ceiling debate in October nor our continuing vulnerability to Europe. But, maybe, that is the message: that the U.S. economy will be fine, as long as we operate in a vacuum, separated from the world . . . and from Washington.
1. Our GDP growth rate of about 1.6% will double next year. (This would be huge!)
2. Inflation is not on the horizon, due to slack labor and weak commodities. (Why wouldn't it be affected by such strong GDP growth?)
3. Fed tapering of QE will be announced in September & start in Q2 of next year. (Remember the hissy fit the market had to Bernanke's press conference in late May? It fell all June because it was panicked over reducing the monthly amount of QE or bond buying.)
4. The S&P will end the year at 1,750 or up another 3%. (That would NOT be huge, but why wouldn't it be impacted by the September announcement of QE tapering?)
5. Long term interest rates rising a quarter point next year and a full point by 2016. (Due to growth or to Fed action?)
6. Despite large deficits, the dollar will not weaken, due to rising interest rates in U.S. (But, our American exporters want the dollar to weaken.)
7. Gold remains flat at $1,200 past 2015. (That assumes no inflation and no growth in India & China.)
I was disappointed they didn't discuss the impact on the market from the debt ceiling debate in October nor our continuing vulnerability to Europe. But, maybe, that is the message: that the U.S. economy will be fine, as long as we operate in a vacuum, separated from the world . . . and from Washington.
