Wells Fargo was never known as a powerhouse economics shop, but that changed when the giant bank bought and absorbed Wachovia, whose economics department was highly respected. Here is a peek at their "combined" forecast for next year:
1. GDP will continue to increase next year and into the following year as well -- yea, no recession.
2. Inflation will remain tame, ending next year at 2.0% and 2.2% the following year -- good news.
3. Capacity utilization remains relatively constant at 79.1% now to 80.8% - reinforcing the lack of inflation.
4. The Federal budget deficit was $668.5 billion this year, decreasing to $538.5 billion next year -- good.
5. The dollar will strengthen next year, making exports more difficult -- good and bad news.
6. Unemployment drops to 6.5% by end of next year and 6.2% the following year -- slow but good news.
7. Short term interest rates remain unchanged next year but rise sharply in the second half of 2015 -- good.
8. Long term rates (10-year Treasuries) rise from 2.85% now to 3.2% at the end of next year -- OK news.
9. Interest rates will rise more rapidly in England, suggesting a stronger pound -- visit England now.
10. GDP will grow faster in Korea, China, India, Mexico, and Russia than in the U.S. by 2015 -- old news.
While economic forecasts are not the same as stock market forecasts, there is a "stretchy" relationship. The currently bullish stock market reflects a bullish outlook for the economy, notwithstanding a dysfunctional government and the withdrawal of stimulus by the Federal Reserve. That is a big difference from last year.
There is surprising uniformity to the 2014 economic forecasts that I've been studying, probably reflecting a "recency bias," which is a common error of forecasters to forecast a continuation of what has been happening recently.
1. GDP will continue to increase next year and into the following year as well -- yea, no recession.
2. Inflation will remain tame, ending next year at 2.0% and 2.2% the following year -- good news.
3. Capacity utilization remains relatively constant at 79.1% now to 80.8% - reinforcing the lack of inflation.
4. The Federal budget deficit was $668.5 billion this year, decreasing to $538.5 billion next year -- good.
5. The dollar will strengthen next year, making exports more difficult -- good and bad news.
6. Unemployment drops to 6.5% by end of next year and 6.2% the following year -- slow but good news.
7. Short term interest rates remain unchanged next year but rise sharply in the second half of 2015 -- good.
8. Long term rates (10-year Treasuries) rise from 2.85% now to 3.2% at the end of next year -- OK news.
9. Interest rates will rise more rapidly in England, suggesting a stronger pound -- visit England now.
10. GDP will grow faster in Korea, China, India, Mexico, and Russia than in the U.S. by 2015 -- old news.
While economic forecasts are not the same as stock market forecasts, there is a "stretchy" relationship. The currently bullish stock market reflects a bullish outlook for the economy, notwithstanding a dysfunctional government and the withdrawal of stimulus by the Federal Reserve. That is a big difference from last year.
There is surprising uniformity to the 2014 economic forecasts that I've been studying, probably reflecting a "recency bias," which is a common error of forecasters to forecast a continuation of what has been happening recently.
