I have been sunning myself in the Autumn like chill of a particularly cold week in August, so my thoughts are not yet up to speed..bear with me!
An interesting note from Ed Yardeni’s blog regarding US employment Jobs Growing Faster Than Workers (excerpt) is worth reading. Latest US industrial production data from the Fed showed a prior month downward revision (June) and current month weakness (July), which is at odds with the recent ISM PMI. Although advance July retail sales data saw some weakness, the picture is neither particularly positive nor negative.
Europe has as would be expected, after a long period of contraction, shown a bounce back in PMIs and Q2 GDP, although I would not classify either piece of data as growth per se. Industrial production is now above year ago levels with the benefit of capital goods production, with monthly industrial production data turning largely positive since the beginning of the year.
Growth in capacity (supply) and its alter ego, demand, remain critical and here concerns over ever present high government debt levels, slowing growth in key emerging markets, high unemployment in developed economies and sustained structural economic imbalances globally are key.
While markets tend to rise higher the longer along the economic cycle you are, for a number of reasons, it should be noted that slowing growth potential and rising interest rates are not usually conducive to long term returns irrespective of market valuation.
GDP is really all about expenditure on the one hand and the investment needed to fund it on the other. There is nothing “dark art” about it, and as such, assessment of risk and return should always bear in mind the underlying fundamental backdrop.