The economy looks bright for much
of the next year according to the Conference Board, Bloomberg’s poll of leading
economists, and the International Monetary Fund. After a prolonged decade of
slow down any positive market news is welcomed. However, with increases in
multiple measurements one can get a better feeling for growing trends and how
those trends will impact national investment opportunities. At present, the
market appears to be increasing in growth and opportunity for both the U.S. as
well as other nations which could encourage further growth.
The Conference Board used broad
based measures that included the labor market, interest rates, factory orders,
stocks price, and construction. The Conference Board’s Leading Economic Index
for the U.S. rose .8% in March to 100.9 indicating a substantial increase in
the U.S. economy (1). The economy has put away its
winder mitts and gloves and significant improvements in the market are possible.
The Conference Board was not the
only one to make optimistic predictions. Bloomberg polled 42 leading economists
and came to the conclusion that an advance of .7 (estimates ranged from .3 to
1) in the leading index could be realized (2). Six of the ten leading index estimates are
higher and it is projected that there will be an economic increase of 2.7
% this year when compared with 1.9 percent in 2013.
Acceleration in the global economy is also expected.
According to the IMF, global growth is expected to realize an increase of 3.7%
in 2014 and 3.9% in 2015 (3). It is
believed that there are still some risks due to poor economic management and
shaky internal structures. Emerging economies will receive a push from demands
in the advanced economies that will help with stabilization.
The outlook is bright over the next two years.
Assessment of the economy requires reviewing indicators from different vantage
points and perspectives. Generally, the more measurements that can be
incorporated into an assessment the better the overall assessment assuming
these measurements are not just “noise”. A single increase in one sector of the
economy doesn’t have broad implications or validity in the same way that
multiple measures across different sectors of the economy have.
The multiple indicators may also raise optimism on a
number of different fronts. Optimism is important for business investment and
consumer spending that support growth. When people feel that the economy will
grow, and their personal financial well-being is positive, they are more likely
to invest and spend the nest eggs they have been putting away. This means they
believe that there will be more opportunities in the future as well as more opportunities
and respond by rewarding the market with investments and purchases.
