Most market-watchers are currently focused on Friday’s jobs report and the Fed’s FOMC meeting in two weeks.
However, Morgan Stanley’s Vincent Reinhart is thinking longer-term in a new note titled “From Resilience to Sustained Expansion.”
“We think the level of activity is marking an upward inflection point right around now,” he wrote.
Reinhart is confident that the economy will look much stronger over the next two years.
“Four factors support our judgment that real GDP will accelerate to a 2-3/4 per cent average growth rate in 2014 and 2015,” he wrote. “1) Peak fiscal drag is behind us. 2) We are leaving further behind the financial crisis of 2008-09. 3) Equity price gains, piled atop house-price appreciation, have significantly added to household wealth. 4) As business people see sales expand and expect more, they will pick up the pace of capital spending.“
Some of Reinhart’s confidence is due to the economy’s resilience in the face of adversity.
“The US economy has traversed a rocky road thus far in 2013,” he said. “Obstacles have included significant fiscal drag, concerns about the Fed’s withdrawal of policy stimulus, and the faltering expansion of key emerging markets. The pace of growth so far may appear unimpressive from a cyclical perspective, but we read the first-half outcome as masking the significant underlying momentum to private spending.”
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