When I am confused I look at the price of lumber. Markets tell the truth. Lumber is sinking. Its weakness is confirming business activity is in bad shape. It is saying the housing sector is in bad shape.
The forecast of the Atlanta Fed made with their model GDPNow confirms the trend of lumber prices. (see above chart).
As of early May the economy, as measured by the GDP, is expanding at a rate lower than 1% according to GDPNow. In other words, the economy is not rebounding as expected by the Blue Chip economists (see above chart).
What are the implications? If you followed my views on how the business cycle works, slow growth will have a momentous impact on commodities, inflations, bond yields, and profits.
Time will tell if this is going to happen, of course.
You will find more details on how these ideas apply to portfolio management in The Peter Dag Portfolio on www.peterdag.com
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977 Author, Profiting in Bull and Bear Markets
No. 1 bond timer in the past 12 months.
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