Tags: Yardeni | economy | capital | spending

Ed Yardeni: US Economy Is Starting to Accelerate at Last

By    |   Monday, 12 August 2013 08:15 AM

A rise in national income may be sparking a long-awaited "accelerator effect" in the U.S. economy, which should yield a dramatic boom in capital spending, according to an optimistic analysis from economist Ed Yardeni.

Yardeni, chief investment strategist at Yardeni Research, wrote on his blog that one of the economic indicators he follows most closely is the relationship between capital spending and Standard & Poor's 500 forward earnings. Recent corporate earnings have been positive by many accounts.

He said a "dramatic rebound" in both manufacturing and non-manufacturing Purchasing Managers' Indexes in July could trigger capital spending to new highs in coming months.

Editor’s Note:
Obama Blunder Spawns Massive Profit Opportunity

"Our 'Second Recovery' scenario seems to be playing out, as pent-up demand for autos and houses is finally boosting economic activity," Yardeni declared. "Another happy surprise is that U.S. exports rose to a new record high during June.

"Contributing to a possible capital spending boom might be a shortage of workers. Yes, I know that the unemployment rate is still very high at 7.4 percent. However, there is a shortage of knowledge workers, including those with basic manufacturing skills and work experience."

In a morning client briefing, Yardeni added that there is still plenty of corporate cash available for stock dividends and buybacks, a lot of pent-up demand for capital goods and that forward earnings estimates for industrials are bullish.

But the Stock Trader Almanac, a newsletter that tracks stock market cycles, advised clients not to get lulled into a false sense of security from big equity gains thus far in 2013.

In a note titled "Catch the Top of the Market Wave," Editor in Chief Jeffrey Hirsch said investors face possible headwinds from here.

"While we do not expect any major down leg until 2014 when Bernanke is gone and mid-term election machinations weigh on the market, a brief respite of 10 to 15 percent is expected over the next two to three months. The market cannot ride this bull wave forever," Hirsch predicted.

Economists surveyed by Businessweek believe the economy will pick up in the second half of the year.

Specifically, they expecte gross domestic product will rise at a 2.5 percent annualized rate from July through December, up from a 1.4 percent gain in the first six months of 2013.

"We continue to see further easing of bank-lending standards, and that is a leading indicator," said Maury Harris, chief U.S. economist for UBS Securities LLC.

Editor’s Note: Obama Blunder Spawns Massive Profit Opportunity

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Economy
A rise in national income may be sparking a long-awaited "accelerator effect" in the U.S. economy, which should yield a dramatic boom in capital spending, according to an optimistic analysis from economist Ed Yardeni.
Yardeni,economy,capital,spending
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2013-15-12
Monday, 12 August 2013 08:15 AM
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