Weekly Economic Indicators: New Money But Slow Growth

Snow in New York by Robert Henri

Snow in New York by Robert Henri (Photo credit: cliff1066™)

The full announcement schedule for the week of February 11th  is as follows:

  • Monday:  None
  • Tuesday:  NFIB Small Business Optimism Index, ICSC-Goldman Store Sales, Treasury Budget, Esther George and Charles Plosser speaks
  • Wednesday:  MBA Purchase Applications, Retail Sales, Import and Export Prices, Business Inventories, and James Bullard speaks
  • Thursday:  Jobless Claims, Fed Balance Sheet, and James Bullard speaks
  • Friday:  Empire State Mfg Survey, Treasury International Capital, Industrial Production, Consumer Sentiment, and E-Commerce Real Sales

I spoke with Doreen Mogavero of Mogavero, Lee & Co., frequent commentator on Bloomberg Television and Fox Business News. The week ahead she will be watching a number of economic data points, including the overall market, NFIB small business optimism index, business inventories, weekly jobless claims and consumer sentiment.

Overall Market View

Mogavero said it is amazing to see the amount of new money that has rotated from bond funds into equity funds. She pointed out that at the beginning of each year, new money always come into the equity market, but this year she is seeing a higher than normal amount of money entering the stock market. According to reports, investors have pumped over $70 billion into the equity markets since January, the strongest run since April 2000, but that pales in comparison with the $410 billion pulled from equity funds since the start of 2008. She added however, “individual investors are forced to put their money into the equity markets because they have to make money to live, not because stocks are cheap.” Investors have nowhere else to put their money to work and have been sitting on the side lines too long. Investors have kept their money in banks at low interest rates for an extended period of time. The question is whether or not this is the time to put money into the market; she feels this is a difficult decision investors face.

Growth Prospects in the 1st Quarter

She is not expecting tremendous growth in the 1st quarter and predicts about 1.5% GDP, nothing higher than 2%. Mogavero is in Nouriel Roubini’s, Chairman of Roubini Global Economics, camp who believes growth will not pick up until the employment situation improves. She is skeptical about the jobless claims data, not sure the data reflects the real economy. She went on to say, the Federal Reserve has kept the equity market propped up for a while and big businesses have been able to survive by operating in a lean and competitive environment. She pointed out, “small businesses have suffered as many of them have collapsed, or are hanging on to shoe strings.” She added that regulation and the economy are geared towards big business rather than small business. While not oppose to big business, Mogavero believes small business is the backbone of the American economy.

Consumer Sentiment

Consumer sentiment has been off and Mogavero believes it will continue to be off for a while, as the government’s handling of the economy is a mess. She pointed out, there is still a malaise and it is a very slow go for the economy. That is why she thinks individual investors have only committed some of their funds into equities, and are hesitant to jump in all together.

Doreen’s Gripe

She is frustrated that interest rates continue to be low - although the 10 year treasury has been on the rise since the influx of funds into the equity market. 

And the Northeast of the US braces for NEMO.

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