Last week saw a return to volatility briefly as the Dow Jones experienced the largest losses for the year. Behind the scenes though, something was happening and economic growth appears to be re-accelerating… or was this the peak?

Re-acceleration?

Soft economic indicators have been expanding over the past six months. Things such as consumer confidence and sentiment. Those are viewed as forward looking indicators as strength in confidence should lead to more consumer spending. Corporate earnings have also re-emerged over the last 2 quarters after going over a year without positive performance. They are expected to continue to expand as the American consumer emerges.

Economic Peak?

The average economic expansion runs for about 5 ½ years at an average GDP of 3-4%. This expansion has gone on for over 8 years, but at a much more meager pace of approximately 2% GDP. Equity value continue to touch all time high’s this year with little supporting evidence that profits will follow suit.

Conclusion

A case can be made for either peak or re-acceleration. What derails this economy will be unforeseen as is typically the case. With soft indicators starting to show strength in hard indicators (such as factory orders or retails sales), re-acceleration does give cause for optimism. It is important to remember, that in the late phases of expansion it is typical for the road to growth to be more volatile.

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