Tags: Abby | Joseph | Cohen | Stocks | Deficits

Cohen: Deficits Threaten to Stall Stock-Market Rebound

Monday, 29 Nov 2010 12:06 PM

U.S. stocks are shaping up to be a good investment, although deficits must be cut, says Goldman Sachs analyst Abby Joseph Cohen.

The U.S. economy is expanding, as evidenced by improving consumer data and overall growth data, and that's good news for stocks.

“We do think that things are starting to get better," Cohen tells CNBC. "It looks like the U.S. domestic economy is regaining some traction.”

Furthermore, stock prices are starting to differentiate, meaning they aren't all moving up and down in unison but rather are moving in terms of their value, a sign that economic conditions are improving.

Technology, consumer, industrial-equipment and commodities stocks have shown to be good buys.

Yet keep an eye on federal and state-level deficits, Cohen says.

"We are much more concerned about intermediate to longer-term policy than we are the shorter-term view.”

Pension liabilities especially need watching, Cohen says. "Keep in mind much of this is related to long-term liabilities."

For growth to take deep root, tax cuts must stay in place, says Cohen. And economic growth is key for cutting deficits.

“According to the Congressional Budget Office, if the U.S. economy does continue to grow, we will see the budget deficit begin to shrink as a percentage of GDP.”

The U.S. Commerce Department recently raised its third-quarter gross domestic product estimate to 2.5 percent from a previous figure of 2 percent.

Economists had predicted an upward adjustment to 2.4 percent, according to UPI.

Improved consumer spending and export figures fueled the upward revision.

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U.S. stocks are shaping up to be a good investment, although deficits must be cut, says Goldman Sachs analyst Abby Joseph Cohen. The U.S. economy is expanding, as evidenced by improving consumer data and overall growth data, and that's good news for stocks. We do think...
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2010-06-29
Monday, 29 Nov 2010 12:06 PM
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