Challenges to a positive outlook: Not all indicators are pointing northward
Since the beginning of the year, I have believed that the second half of 2014 would be positive for both the economies and the equity markets of the developed world. Like many, I was surprised by the weak first quarter in the United States — real GDP was –2.9 percent — but I viewed that as a kind of mini-recession within an ongoing recovery and attributed it to severe weather conditions, accounting issues related to the Affordable Care Act and other factors. I expected that the following quarters would exhibit renewed momentum based on the economic data being reported.
Almost every indicator I am now looking at is, in fact, showing a better tone to the economy. Vehicle production is running at 17 million units; consumer confidence and retail sales are improving; bank loans, which indicate a willingness by business people to borrow for inventories or new projects, are strong; capital spending is picking up; new plants are being planned or built; the unemployment rate is