A Look Ahead to Q1 GDP

Today’s personal income data caused a number of firms to upgrade their estimates for Q1 GDP.  Here is a smattering of estimates (some old, some new) for Q1:

  • Consensus: 2.8%
  • Merrill Lynch: 3.0%
  • Nomura Securities: 2.5%
  • Goldman Sachs: 3.4%
  • Macro Advisers: 3.5%

The Orcam Recession Index is (has been) telling a similar story – the risk of recession remains low (Via Orcam Investment Research):



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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Jay

    I’ll ask you the same question that The Bernank was asked: Is it too late to get in on the stock market? (now that it is at all-time record highs) Does the market just keep grinding higher or do those getting sucked in now get slammed later in a scary correction?

  • VB

    This bull run will never end…

  • Jay

    “This bull run will never end…”

    Didn’t they say the same thing in 2000 and 2007?

  • LVG

    I get the impression that Cullen is long-term bullish, but short-term cautious.

  • esb

    My best guess is that the top will roughly coincide with a front page WSJ article by one Jon Hilsenrath two weeks in advance of a Fed meeting with a press conference.

    The real question is whether the street will arrange a blow off top or a distribution dome top a month or two before.

    The next meeting with a press conference is in June, and if you see an April spike (into the 1700s) then use the gift to get the hades out of Dodge.

    (A wave counting quant friend claims that we are in the last half of Ee5, whatever the heck that means.)

  • Alberto

    The euro area will implode before the end of the year and the economical data from Japan are simply awfull and Europe is still too important for China and other EM markets. This will not be bullish, expecially for the financial sector, but will be extremely bullish for the US dollar and the long duration treasuries; I think we will see 2% yeld for the 30y.

  • Boston Larry

    This market has gone up too far too fast. A correction is overdue. Maybe one hasn’t come yet because too many were trying to get in from being underweight equities. Even so, if I were buying here I would buy very cautiously if at all.

  • Boston Larry

    Sell in May and go away :) This has often worked in the past.

  • Andrew P

    I wouldn’t make timing predictions on the implosion of the Eurozone. They have always confounded such predictions in the past by pulling a new rabbit out of the ECB’s hat that kicked the can a few more months to a year. Eventually it will implode, but I have no idea when. I suspect it will happen once the citizens of a major EU state (Italy, France, Spain, or Germany) get so fed up that they elect a secessionist government. But when the Eurozone does come to an end, we could see total chaos. A negative yield on the 10y T note is not outside the realm of possibility, especially if Europe has a massive wave of bank failures.

  • Alberto

    Andrew, not just the EU banks, all the banks. Don’t be impressed by the apparently healthy balance sheets of US banks. They are overly exposed via derivatives on any risky business. Try to imagine what could happen to those financial institutions who sold protection like AIG in the past. This system is broken and cannot be fixed. What I really can’t understand is why US citizens are unable to see who much interconnected the system is. If one major currency go burst all the monetary system go burst, there is no such thing called safe heaven, excpet in the short term some government bonds. For this reason, because of the extreme level of risks around I’m really surprised about this bullishness and about the bearinishness on gov bonds. People will cry once again.

  • Nils

    Take down Deutsche Bank and all hell will break loose…

  • Alberto

    DB, the black hole with a bank around.

  • http://oneconomist.com Hans

    These accelerated GNP growth predictions will aid and abet their bullish call to purchase more stocks.

    If they are correct, what will be the Bank Bernank course of action?

  • Mr. P

    Given the tax inreases, where is all of the economic growth coming from in Q1?

  • http://oneconomist.com Hans

    Good question, Mr P…Hopefully, it is from all that Medicare/caid fraud and tax refunds to state inmates.

    If they are wrong, which I believe will be the case, they should receive the Easter Bunny Award…

  • Andrew P

    The big US banks may be shaky or not, they are so opaque that they are impossible to analyze. But I do have confidence in US deposit insurance up to the 250K limit. The USA issues its own currency, and the Federal Government can not run out of US Dollars. Politically, there is no way the US Congress can default on deposit insurance, even if they had to issue trillion dollar coins to make good on it. However, you can’t say this about the Eurozone. EU deposit insurance is at the State level, and Eurozone states can run out of Euros. The EU is run by clowns who make the rules up as they go along. There is no telling how much of the Eurozone deposit guarantees would be honored if you had a disorderly collapse of the Eurozone and its banks.

    The UK has its own currency also, but it has 2 really big banks with E- Weiss ratings (RBS and Lloyds). There is also a potential secession problem in Scotland. While the UK would probably honor its deposit insurance in a general collapse, you can’t be as sure as I can be in the USA.

    Just keep all your deposits well below $250K/bank in the US, and at least half money in other assets and you should be OK.

  • hangemhi

    Probably private sector debt, and probably reinvested savings from those sitting on mounds of cash. And I know foreign money is pouring into US real estate. Plus we still do have deficits.

  • Mr. P

    I think the simple answer to my question is “more debt” and that is why GDP can be a “misleading indicator of economic health”. GDP reflects spending not true economic health.

    If you look at something like “real median income”, it continues to decline. Of the two, I think “real median income” is a better measure of economic health than GDP…

  • LilleStor

    Wise people say that human ingenuity overcomes all challenges – ie Keynesian economics and the medicine (cheap fuel) it produces to propel cultures and economies forward. So, this ‘bull run will never end’ – oh, yeah? Check your premises carefully; they are typical and widely held, and that is a dangerous notion – those same premises bear many contradictory elements that most financial experts just choose to pass over time and time again – someday, the cheap fuel will implode/explode perhaps, and the medicine will darken and turn very dark and poisonous perhaps…. check carefully what textbook/consensus and financial intellectual experts believe, even the notion of MR. There is a lack of balance, and a question of balance that, so far, has been miserably addressed here.

  • Old Dog

    Too many folks hoping for a pullback so they can get in. Makes it tough for any correction to get very far.

    If speculation is your goal – good luck.

    If investing is your goal – relax.

  • http://www.nowandfutures.com bart
  • jaymaster

    It’s never too late, and it’s never too early!

    If you believe in owning equities, you should be buying on a regular basis.

  • jaymaster

    Well said.

  • Andrea Malagoli

    I am amazed how after only five years all has been forgotten, and now the media are back to chanting that “this time is different” and that this time is “for real”. Asset bubbles do not last forever, plain and simple.

    Also, Mr.P makes the good point that economic growth alone shows only the spending side of the equation. It is easy to engineer a recovery with giant expansion of credit (public/private). What happens next is less clear.

    We continue do believe that economic growth will let us “grow” out of the massive amount of debt. This time is different again.

  • Johnny Evers

    Agree 100 percent.
    Real median income and maybe real retirement account net worth would more accurately measure the health of the economy for the broadest group of Americans.
    You could add other measures, too — what is the average life insurance benefit for the median American, health insurance coverage, home equity, etc.
    Again, for the median.