5/29/2015
By Charles Payne, CEO & Principal Analyst

Gross Domestic Product (GDP) was revised lower as anticipated, although not as much as many predicted. The original 0.2% gain is now -0.7%. Once again, we begin a new year in economic decline and once again the experts say don’t worry, its temporary, or as Janet Yellen likes to say, “transitory.” If this is getting frustrating, it should; this is the third contraction during this recovery. Since 1981, no recovery saw even one quarter of contraction.

Areas of weakness include exports (strong dollar), business investment and corporate profits in non-financial businesses.

On the other hand, while not enough to keep GDP in the plus column, there were strengths in imports (strong dollar), residential fixed investments (otherwise known as housing) and inventory.

The worst recovery in history lumbers continues.

If the experts are correct and all that inventory build proves to be smart, we could get a nice bounce in the second half of the year, but if not, what happens to the stock market? There are no more tricks at the Fed, although today’s news makes the notion rate hikes are imminently laughable. What’s not funny is the bind horrendous fiscal policies have created. 

A Gordian knot of sorts that becomes harder to cut. 

The paradoxical reaction to falling gasoline this year makes one wonder what it would take for consumers to step up to the plate.  Savings were edging higher but surged in the first quarter to 5.5% from 4.7% in 4Q14. The last two years has seen savings at 4.9% from 7.2% in 2012.  Something is clearly spooking consumers. The big bet on consumers coming to life will need more than warmer weather.

Charles Payne
Wall Street Strategies

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