Economic guru and Forbes columnist Brian Wesbury is making the case for “medium-term bullishness” for the U.S. stock market, saying the bull market rally will “probably” extend well into 2011 as the economy starts to expand.
Writing in the magazine, Wesbury says that monetary policy is likely to remain “looser” for a long time, perhaps well into 2010.
“Eventually, of course, this more extended looseness will generate higher inflation and extra Fed tightening in 2012 to 2014, but that's a story for another day,” writes Wesbury.
“In the meantime, the prospects for economic growth continue to brighten,” he says, along with writing partner, Robert Stein.
According to Wesbury’s research, the U.S. will see a 3 percent annual rate of consumption growth in the third quarter with no change in the fourth quarter. Auto sales will be down in the fourth quarter, but a rebound in retail sales in other sectors should offset this difficulty.
Business investment should add 0.5 points to real GDP growth but growth will be negative in the fourth. After four-and-a-half years, Westbury thinks home building finally hit bottom during the third quarter and will add about 0.2 points to the real GDP growth rate during last quarter of this year.
“Adding up all these components of GDP gets you to our forecasts of a 4 percent growth rate during the third quarter and 5.5 percent in the fourth quarter,” says Westbury.
Though those projected U.S. growth rates are exciting for investors, the international news is not so invigorating. Reuters is reporting that GDP growth will struggle to hit 1 percent in 2010 in the U.K.
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