click for larger graphic
I hate whenever the G-word — “Goldilocks” — gets trotted out. Its too complacent, too pat, and it often means we are heading for trouble.
That said, I find the chart above quite fascinating. Its from Fidelity, and it suggests we are in the sweet spot for equities:
“The U.S. economy has been expanding at a modest but consistent clip (with real GDP growing at 1.6% year over year as of Q2), inflation has been subdued (with the core Consumer Price Index [CPI] rising 1.7% as of Q2), and the Fed has kept the liquidity spigot wide open through QE3 (at $85 billion per month since September 2012).
Meanwhile, the eurozone economy has stabilized and China appears to be recovering from its slowdown. As of September, 72% of the countries for which Markit/HSBC publishes manufacturing PMI (Purchasing Managers Index) data were in expansion, up from 69% in August and 59% in July. So, for the first time in several years, the global economy seems more synchronized.”
Fidelity describes this as “the best of all worlds for stock investors.” While that’s a touch too Candide-like for my tastes, I cannot deny that cconomic growth has been positive while inflation has been subdued, and the Fed is not tapering anytime soon.
Smoke while you got ’em . . .
Outlook: Can the Goldilocks sweet spot continue?
Fidelity Viewpoints, 10/20/2013