Tuesday, December 22, 2015
The major indexes are essentially flat ahead of the open, with oil prices stable and the final look at Q3 GDP matching estimates. But it's hard to read too much into these year-end moves given the seasonally low volumes.
The Q3 GDP growth pace got lowered to +2% from the previous +2.1% reading, with consumer spending remaining unchanged at +3%, inventories contributing less than before and government spending a tad bit more. This compares to +3.9% GDP growth in the June quarter and the weather-battered +0.6% growth in the first quarter of the year. Estimates for the current period aren't much better than what we experienced in Q3, with the Atlanta Fed's GDPNow measure currently a bit below consensus estimates at +1.9%.
All in all, the U.S. economy seems to be on a moderate growth trajectory, with consumer spending and housing helping offset the drag from weakness in the manufacturing, mining and export-oriented sectors of the economy. We know that the Fed remains comfortable with this growth picture and is on track to gradually wean the economy away from low interest rates in the coming days.
In theory, this tightening cycle shouldn't be problematic for the markets given the Fed's transparent targets. But things can get complicated in the world, particularly given the fact that we have no prior experience to guide us in how to get out of a zero interest rate regime.
We don't know what will happen in 2016 and beyond, but it will most likely be a bumpy ride.
Director of Research
Note: In addition to this daily pre-open article about the market, economy, and the corporate earnings picture, Sheraz Mian also provides detailed earnings analysis in his weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz Mian publishes a new article, please click here .