Q3's GDP Reading Sets Up For A Better 2017
Real GDP (gross domestic product) rose at a 3.2 percent rate in Q3, according to a preliminary report from the Bureau of Labor Statistics. This represented the best sequential growth rate since GDP rose 5.0 percent in Q3 of 2014.
Argus’s Jim Kelleher said the latest strong GDP reading sets the stage for a better 2017.
The Q3 reading marked a recovery from the final GDP growth of 1.4 percent in Q2 and “reflected improvements in a range of categories and signaled fairly broad-based strength across the consumer, commercial and industrial economy,” Kelleher wrote.
Stock Rally Not Related To Election Result
“Since the election, stocks have been in a sharp rising pattern,” Kelleher mentioned. While major averages, including the DJIA, NASDAQ, S&P 500 and Russell 2000, have all risen to new all-time highs, this trend represents a continuation of strength that is witnessed in the second half of any year.
Many investors believe the sharp rise in stocks has been driven by Donald Trump’s victory. While the rally does coincide with the President-elect’s victory and the agenda of the incoming administration does include tax cuts and government spending on infrastructure, the market “was already in a mood to rise, in our view,” the analyst commented.
The bigger factor in the stock rally is the optimism surrounding a turnaround in profits and the economy, Kelleher stated, while adding that companies had reported Q3 EPS beats and seemed set to post strong Q4 earnings, while the economy generated the best GDP report in two years.
The analyst recommended to “look for bargains among high-quality names in currently out-of-favor sectors such as Consumer Staples and Real Estate.”
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