Everybody's favorite Economist David Rosenberg who works at Gluskin Sheff has the following to say about 3Q GDP.
He notes that the "S&P 500's 15% rise in the 2Q usually follows a real GDP gain of about 3% after such a stock advance. " So consider that de facto what is being discounted at this time for current quarter growth, it better be a humdinger of an inventory build." "For the market to build off of its current advance, you would need to see something like 5.5% real GDP growth."
Too much optimism and hope is being build or baked into market expectations.
Its not going to happen with the current credit system.
Take for example the mortgage market grew in the ten years preceding 2007 by an average 12% a year. The total outstanding mortgage market went from $6.8T to $14.6T. That total increase in mortgage credit fueled top line GDP growth of only 3%! In retrospect it also fueled the fire as well.
The growth coming from FNME/FRE/GNME is going to be no where near the 12% for the foreseeable future.
I cant even imagine 3% growth let alone 5.5% growth unless the numbers are fudged, or credit creation suddenly comes back on line.
The Fed and Treasury with their various programs have tried to keep that mortgage number stable for the time being, but higher interest rates will not help.
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