I haven’t written much this week because I haven’t seen much to write about.
Still looks like both the economy and the markets are discounting the cliff. And still looks to me like ex cliff GDP would be growing at about 4% this quarter, with the Sandy-cliff related cutbacks keeping that down to maybe 2.5%. And going over the full cliff is taking off maybe 2% more, leaving GDP modestly positive.
Which is what stocks and bonds seem to be fully discounting.
As previously discussed, the housing cycle seems to have turned up, which looks to be an extended, multi year upturn with a massive ‘housing output gap’ to be filled. And employment is modestly improving as well, also with a large output gap to fill. Car sales are back over 15 million, and also with a large output gap to fill.
The way I see the politics unfolding, the full cliff will be avoided, if not in advance shortly afterwards, as fully discussed to a fault by the media. That means GDP growth head back towards 4% (and maybe more)