Q2 Much Stronger than Most Expected

This Business Outlook is from the latest issue of Businessweek and contains a well depicted synopsis of the recent sources of strength in the U.S. economy and a detail of the rebound in the second quarter. If it all pans out to be true, then we had a soft landing and goldilocks lives on. One thing, though, is I disagree with the author's headline and premise; that the good news entails the next Fed move is a rate hike; in fact the next move should be a cut, even inf the face of last weeks bond market activity and the 10 year treasury yield rising t0 5.15, the 9o day t-bill still signifies a cut. Anyhow, enjoy.........

U.S.: Stop Thinking Rate Cut, Start Thinking Rate Hike With economic growth rebounding, it's time to revise expectations

After a long and pleasant dream about the Federal Reserve cutting interest rates, the financial markets are beginning to wake up to reality. That is, maybe the Fed's next move will be not to lower rates but to raise them. We won't see action anytime soon, but market expectations are starting to turn 180 degrees from where they were only a month or two ago.

Most Wall Street Fed watchers who had been predicting the central bank would cut rates are already either pushing those forecasts further into the future or abandoning them altogether. And options trading in federal funds futures, which can offer a reading on what the market expects the Fed's rate will be, implies a 43% chance that policymakers will lift rates by their Dec. 11 meeting.......

......What has changed? Economic reports are making it increasingly apparent that the slowdown in the economy is over, with little if any progress on either loosening up the labor markets or bringing inflation permanently back into the Fed's comfort zone

.......ALTHOUGH WASHINGTON revised first-quarter growth in real gross domestic product down to a puny 0.6% from its original estimate of 1.3%, the overall implication for future economic growth, based on the details of the report, was clearly encouraging. The GDP numbers showed that demand from U.S. consumers and businesses grew 2.5% during the quarter, a faster annual rate than first estimated. That pace was a speedup from 1.8% during the previous three quarters and the fastest in a year..........

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