In the words of ex-Fed chief Ben Bernanke, it’s green shoots time. After posting a “robust” 1.4% GDP growth for Q4 2015, it’s time to take off.
Spring used to be the time of economic rebound. Coming out of the winter doldrums, spending and building come back to life as the weather warms. This scenario is so ingrained in economic theory that college textbooks offer it as proof.
However, the fact is that since 2010, many theories have been so perverted by the actions of central banks.
One of the basic truths of economic theory — supply and demand for price discovery — is no longer a given. This is evident daily in the US treasury market. As Treasury pumps out more and more debt and buyers in Asia and Europe slacken their appetite for our debt, yet the yield remains ultra low. Try explaining that using the supply and demand theorem.
So I figure this will be at least the sixth spring “green shoots” season that will die on the vine with anemic growth.
As the first quarter of 2016 comes to the end this week, we should see a run up in stocks again.
The window dressing to get the markets green for the quarter will be the overarching goal this week.
Let’s put the market levels down in ink today and come back Friday morning to see how well they did.
Dow Jones: 17,515.73
S&P 500: 2,035.94
US 10-year note: 1.905%