Wednesday, January 30, 2013

No surprises

Fed Keeps Stimulus Amid Signs of Weak Economy

"Markets showed relatively little reaction to the GDP report, in part because it reinforced expectations that the Fed will continue to provide stimulus as long as the economy is weak."
And, of course, the Fed did say they would continue to provide stimulus.  Nothing new there.

GDP Shows Surprise Drop for US in Fourth Quarter

"The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.

The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles."
Well, this is a little earlier than I expected, but I wouldn't really call it "stunning."  The way I see it, the good news is where the shrinkage came from, well, except for the exports.  And, as a lot of people are saying, there were a lot of "one-off" items that hurt GDP, sort of like one-time charges on a company's earnings. 

The main question for stocks is whether the Fed stimulus is going to outweigh what is, in my opinion, a likely recession.  One may also wonder how this might affect the federal government's plan to reduce the deficit.

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