click for larger graphic
Source: Fidelity



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?
Jurrien Timme
Fidelity Viewpoints, 10/20/2013

Category: Economy, Investing, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “Global Synchronized Goldilocks Markets?”

  1. Concerned Neighbour says:

    Yep, that’s about the size of it. 110 points straight up on the S&P 500 in under a month, this after an epic multi-year bull run.

    I noted with amusement a “pro’s” comment in Bloomberg this morning about how the Fed has created a market where “good news is bad news, and bad news is good news”. The reality is he has half of that right: it’s really “good news is good news, and bad news is good news”, and it has been that way for quite some time already.

    We are living in a liquidity-induced mania, and the bubble grows larger all the time with each $85B hit. When the next crisis they are currently promoting hits, if the banks are bailed out again there will probably be mass riots in the streets.

  2. rd says:

    Hopefully corporate revenues and median disposable income will start to rise at a decent clip. It is hard to see the economy and the stock market rising much more without at least one of those going up at a decent pace unless the emerging marekts/Eurozone pick up the slack.

    • Angryman1 says:

      Corporate revenues have been surging, disposable income when compared to demographics as well. This post represents everything with econ-blogging analysis. You don’t use demographics and you have a completely useless analytical framework.

  3. george lomost says:

    “economic growth has been positive while inflation has been subdued, and the Fed is not tapering anytime soon.”

    In simple English that mean that equities are now a ‘risk-OFF’ trade while avoiding equities is a ‘risk-ON’ trade because you risk missing this [sure thing] rally and have the added interest rate risk should interest rates rise.

    What’s not to like?

    • neddyj says:

      @george lomost

      You couldn’t have put it any better – I was trying to get Barry’s thought on this yesterday, but I think you’ve captured my question with better wording. Isn’t there something wrong when the perception is that equities are less risky than bonds?

  4. Angryman1 says:

    I would ignore government indexes like “GDP” or “employment reports”. They are useless and lag by months, if not years. I use GDI,income growth,earnings,demographics. They support a economy that has been growing at 2.5-3.5 range since 2010. Considering the US trend is probably closer to 2.5%, that says a sig. chunk of the recession has been filled. No wonder markets are recovering and deficits are plunging.

    This explains your equity markets. Time for the government machine to catch up. They were horrible in the 80′s as well when we needed more economic growth/job growth to keep up with demographics.

  5. bear_in_mind says:

    Can anyone cite or remind readers how many times Fidelity has correctly forecast a recession? Or accurately forecast a market top?

    Just saying, a trend is a trend until it’s not a trend. Displaying what happened falls somewhere between history and historic fiction, depending on how tortured the data analysis.