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By next guest says the rally in equities to come.
Too fast joining me this outlook for the markets and the economy John writing former chief economist for Bear Stearns chief economist for RDQ economics good -- -- -- pretty.
Too far too soon but one what a nice ride it's been as -- -- It's been a good drive and I do think this market -- to.
Mark some time because we're up 16% this year even after the decline today.
And -- -- outstripping the growth of profits that's okay because interest rates are so low.
But we're beginning -- -- to see the adjustment but which in interest rates as we've seen in the month of may.
The ten year treasury yield has come up about half percentage point -- is today so I think those interest rates are going to give us a bit of a headwind.
And the market's going to have to pause for a while.
And I think that would be healthy.
-- to see some correlation between.
Bond yields and and also the S&P yields and and that's because few people scratching their heads we're we're also seeing profits.
Stubbornly persisted that in the face of gloom about the prospect -- this year.
What what -- an investor to make them.
I don't think we should be too gloomy about the prospects for the shape yes that been a lot of scares -- because won't be in the sequester in the tax increases the fiscal cliff for the beginning of the year.
The economy seems to be doing pretty well.
Through all of -- and I think that we're going to see economic growth this year.
At around two and a half percent not great but certainly not looming as good as we've seen so far in the recovery the problem for investors is.
Interest rates artificially low and have been held artificially low by the Fed.
We face a multi year adjustment process where those rates are going to go up and that's going to create a headwind.
Can the U if you will there's the contrivance that are these markets.
In and the architect of course is the Fed.
Does the -- have the latitude to start talking about.
Squeezing the -- that tapering if you will choking off their largesse.
Looking two years I don't.
It doesn't appear to be a bright horizon out there if we don't have that 85 billion being pumped into the economy if we don't have.
Accommodative to be very conservative accommodative monitor -- While we have to remember that the Fed is continuing to ease rates from zero.
June marks the end of the fourth year of economic recovery so we've been recovering for.
Quite a considerable period right now and it's very unusual types such policies that not -- easy but it getting easier.
Day in day out so I think the Fed does have to -- things back to avoid.
Potentially creating bubbles in the market to avoid potentially create inflation.
Down the road although there's not much inflation that you don't speak of right now.
You think of the policy that's been followed by this fat even the -- motive policies of the Obama administration over the course of time to look at these numbers I can't find inflation anywhere.
It's just is that there.
And I understand.
Year economists love to worry about inflation.
Or sometimes even Dave Bush but.
It still looks to me as though the greater concern ought to beat deflation.
But you conceal kinds of distortions here isn't that -- of New York City.
Very recently the prices they yell at New York taxicab medallion.
For an individual driver went above one million dollars is gonna be a cab driver New York you have to have a million dollars to buy that.
That's a function of asset prices being -- was -- in the art market.
We may have seen it in the Major League soccer getting -- hundred million dollars for a franchise in New York.
-- it seeps through to the grocery store to the gasoline -- You know I'm I'm going to constrain my my fears and alarms.
And let the area -- -- guards have their art and and -- vocational.
John it's great to have you here -- come back soon we'll see how this market in this economy moved through the rest of the year they think it --
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