Global growth appears to be gathering momentum after an unusual cold snap in the U.S. The employment picture has improved with four months of sustained job growth. And, inflation is firmly under control, with the implication that stock and bond markets are fairly valued in a low interest rate environment.
Outlook for Global Growth. The World Bank trimmed its global growth forecast for 2014, but tempered its outlook by saying its downgrade is mainly a reflection of events that have already happened, from the Ukraine crisis to unusually cold weather in the United States. The World Bank expects growth to quicken later this year as richer economies continue their recovery.
U.S. Employment passes pre-recession peak. The number of Americans working has passed the pre-recession peak, with four straight months of job growth exceeding 200,000. However, with population growth since then, jobs remain far below their pre-recession level. The underlying message of the jobs report is that sustained economic activity is present, which is the pre-condition for momentum to continue. Financial Times (tiered subscription model).
Inflation Beaten; Rates Lower for Longer. Investors should largely ignore inflation risk, according to Pimco’s new Chief Economist, Paul McCulley. The “War on Inflation” was won early this century. Interest rates will be kept lower for longer without the threat of inflation. An implication is that both bonds and stocks are presently in zones of “fair valuation”—not cheap, but not rich, and definitely not “artificial.”
McCulley’s complete analysis is located here:
And in case you missed it, click here to read last week’s blog post which focuses on ways that grandparents can help with education costs.
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