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Economists Upbeat for 2013?

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    Phil Orlando of Federated Investors on the recent survey on GDP growth from the NABE.

  • Duration 3:48
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Parts of 150% of economists meantime expect much from GDP growth in the year ahead it's up from 36% -- said the same three months ago.

This a new poll out quarterly survey by the national association for business.

Economics Phil Orlando chief equity market strategist at Federated Investors joining us now in studio feel good to see it -- -- that is that good news already factored into stocks at this point.

Well if it sounds like an impressive study but the conclusions really aren't that great we've been limping along at 2% growth now for the last three or four years remember trend line economic growth -- 3%.

We we ought to be at 4% right now given where we were from the depths of the Great Recession so basically what the study is saying.

Is that the majority of economists think we're gonna continue limping along at 2%.

The difference.

Between 2% GDP growth from 4% GDP growth was about six trillion dollars in additional revenue to the federal government over ten year period we've we -- do that what we could eliminate all of these these issues in negotiations -- we've been having over the last three -- four years we've.

-- of around number -- -- some attention today with this a ten year treasury yields.

Moments ago you -- them getting above 2%.

So your outlook and you know the economy continues to improve soon perhaps as treasury yields and interest rates in general -- your outlook given that for the stock market is still.

Relatively positive -- and well who.

We've got one of the more bullish outlooks are full year target on the S&P 500 to 1660.

Which would be a roughly fifteen to 20% total return.

Over the course of -- between thirteen but we didn't however think we get the 1660 straightaway that.

What we thought there would be some pullback at some point during the early stages of the year.

At what point though do higher interest rates -- get in the way of your forecast like you factored in.

What rate on the term care what we're already priced at 2% we are pricing in a 5% treasury -- so 2%.

-- looking at the mathematics of the Fed model inappropriate PE would be something like fifty times earnings which is patently absurd so we've been ignoring these abnormally low interest rates that are there because of fed policy and factoring in a normalization of interest rates and our model.

Don't and it may be -- a higher interest rates though what actually get Washington.

On the Friday and get them back.

Potentially well if they start seeing rates go up even toward 5%.

What one other thing from a financial market standpoint is that interest rates go up which means that bond prices will be going down.

We're gonna see a massive dissension mediation we think out of bonds into stock so that's one issue multiple expansion is gonna fuel -- rising stock price as you make a case of.

-- kind of what David was saying is that you seem to be ignoring.

Potential cut pitfalls of of Washington getting in the way of the markets again.

Almost assuming we'll get a deal at the last minute like we always do because that that's the one thing that could stand in the way you know economic growth and all these things is not well.

That's the one reason why we've been sort of cautious here in the beginning of the year we felt that there might be the potential for five or 10% correction.

In the first first quarter first half based upon.

Sort of be intransigence that we're seeing -- -- Washington the market however seem to be ignoring what's going on right now they seem to be saying look we've seen this movie before we know how what ends.

At the end of the day they're gonna figure out a deal so I'm not gonna get suckered and selling stocks and -- a big move up one of these days you know.

I'm really quickly but mistaken of the shift from fixed income and the stock she saw a record amount of money according to a Reuters report 55 billion dollars going into stock funds.

About 25 billion that going in the US stock funds -- something we haven't seen since the middle of the last.

Decade absolutely and that's a trend that we think finally has -- the we've been waiting for this equity flow for the last five years it's finally starting to happen.

Slowly creeping back to -- 141000 -- leveled off a bit today was so we'll keep perhaps under the desk for the party and everything but thank you Phil thank you thanks for having me Phil Orlando insurer.

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